\” Government is privatising some sectors in India \”, you may have had heard or read this statement lately on a news channel or in a newspaper and may wondered on the question \” What is Privatization?\”, The Answer is simple, The Transfer of Ownership, Property or Business from the government to the private sector is termed as privatization. It is also a process where a company which runs publicly taken over by some private individuals or group of few individual people, is called as \”Corporate Privatization\”.
The Difference Between Government Privatization & Corporate Privatization is Government operates and administrates some industries within the country, & the enterprises or industries which are not run by the government are included in private sector with no government interference. On the other hand Corporate Privatization is a reform which allows the company to restructure. Corporate Privatization takes place generally after mergers of two or more companies, public trading is not allowed in privatized corporate industry.
Privatization in India ?
The new industrial policy 1991 came with some major reforms in Indian economy, it allowed interference of private enterprises in PSEs (Public Sector Enterprises) by handing over the operational control to private individuals, for the efficient running of the public sector enterprises. In 1991 government adopted disinvestment & selling the loss making enterprises/ units to private sector. Disinvestment is a process where government sells or transfers minority shareholding to private individuals, by (Government) maintaining 51% share.
The two main reasons for need of privatization are, making PSEs run efficiently which can be resulted from private ownership and business operations. sectors which are currently privatized in India are Agriculture, forestry, fishing, mining & quarrying, electricity, gas, water, manufacturing, construction etc. Officials who handles the private company have higher incentive as well as higher income, so usually privatization leads to efficiency of business this is one of major advantage of privatization. Privatization results in accomplishing long- term goals of the privatized firm. Privatization increases competition in market, which pushes the economy to efficiency.
Recently in May 2020 the finance minister of India Nirmala Sitharaman announced major reforms of privatization in space, defence, coal and power distribution sectors of India. The reform was welcomed at some levels and opposed at some levels. The main advantage of the reform will be that the increase in investments in these sectors, the interference from the private individuals or enterprises may lead to utilise the resources efficiently, it will also reduce the political interference in the operations of the PSEs which may lead to enhanced productivity. Causes because of which the privatization had been opposed. Disinvestment aroused a political opposition from the employees who had been under pressure of losing their jobs, because of a facing short- term unemployment. Another problem with private sectors are the costs of the products of the private sectors are high, where private sector may sometimes not be interested in making a quality product or in reducing the costs of the products.
Well I am not a Proper Economist By occupation, but in my opinion the synergy and collective efforts between PSE officials, Private Individuals( Who Owns the Enterprises or Shares of the PSEs) and the Employees of the related privatized Enterprises/sector/industry may help boosting Indian Economy by increasing the percentage of contribution towards Indian economy\’s GDP.
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