1. Privatization and disinvestment were part of the 1991 New Economic Policy reforms in India aimed at increasing private sector participation and reducing the financial burden of public sector units. 2. Privatization transfers public sector assets or enterprises to private ownership and control, while disinvestment involves reducing government ownership of public sector enterprises through minority stake sales. 3. The objectives of privatization and disinvestment include improving efficiency, management, resource use, foreign exchange earnings and industrial growth, but they may also reduce social welfare and increase inequality.

1. PRIVATIZATION & DISINVE
Presented by-
Amritha k s

2. NEW ECONOMIC POLICY (NEP)
• NEP in 1991
• The NEP called 'new’.
• The measures taken under NEP are
popularly called 'economic reforms’.
• The 3 directions are popularly labelled as
LPG.
• Need for economic reforms in 1991 arose
due to:
1. drastic fall in foreign exchange reserves
and
2. rising deficit financing.
• PM _ PV Narasimha Rao
• Finance Minister _ Dr. Manmohan Singh

3. ECONOMIC REFORMS

5. MEANING OF PRIVATIZATION
• Increasing the role of private sector in the economy .it can be achieved in
two ways
I. To encourage the entry of private units in the areas which were there
received for the public sector.
II. To transfer the public sector units to the private sector.
• Privacy is the process of transfer to private ownership and control of assets
or enterprises which were previously under public ownership.
• Aim –to earn profit.
• Names of privatization in different countries
I. England_ De-nationalization. II. Australia _ Prioritization
III. New Zealand_Asset–sales programme IV. Mexico _Disincorporation
V. Sri Lanka _ Peoplelisation

6. OBJECTIVES
• To increase efficiency & Competitive power of the enterprises.
• To strengthen industrial management
• To make optimum use of resources
• To earn more and more foreign Currency
• To achieve rapid industrial development of the country

7. ADVANTAGES
• Reduction in economic burden
• Increasing in efficiency
• Scientific Management
• Reduction in political interference
• Encouragement of new innovations

8. DISADVANTAGES
• Lack of social welfare
• Increase in inequality
• Increase in unemployment
• Exploitation of weaker sections

9. RATIONAL FOR PRIVATIZATION
1. The assumption is that the private sector is profit-oriented, more efficient
and has better performance with good quality management which helps
to modernize and diversify businesses. It allows adoption of global best
practices and technology. It helps raise performance benchmarks and
promotes a responsible work culture. It leads to a more efficient allocation
of resources.
2. There need not be government accountability.
3. Private sector enterprises are subject to capital market discipline
4. No political intervention possible.
5. Prompt decision making leads to exploitation of opportunities.
6. Customer satisfaction is maximized.

11. • Sales of public sector’s equity to a private investor.
• In India the functioning of many PSEs has been a contentious issue.
• Reason _ Low productivity, poor quality of products, over manning,
inadequate human resource development and low return on capital
• Handed over to the private sector to improve their functioning and
improvement.
• Disinvestment means sale or liquidation of assets by the
government, usually Central and state public sector enterprises,
projects, or other fixed assets.
DISINVESTMENT

12. NEED FOR DISINVESTMENT
1. Reduce the financial burden on PSUs that are sick and going bankrupt.
2. Encourage private ownership and sharing of government assets
3. Improves market discipline, competition, and introduction of new
enterprises
4. Depoliticization of essential services
5. To become competitive, public enterprises must upgrade their technology.
6. Workforce rationalization and re-training
7. Developing diversification and expansion strategies.
8. Increasing R&D expertise and strength

13. THREE FORMS OF DISINVESTMENT
Minority
Disinvestme
nt
Majority
Disinvestme
nt
Complete
Privatisation
Disinvestment differs from privatization in that the former involves dilution of ownership and not
transfer of full ownership to the private investor

14. 1. Minority Disinvestment
<= the government retains a majority of the share in the company,
generally more than 51 %.
<= Govt retains management control.
<= Eg:- Power Grid Corporation Of India Limited, Rural Electrification
Corporation Limited, NTPC Limited, and NHPC Limited.
<=The government announced a policy in 2018 that all disinvestments
for 2018-19 will be made through minority disinvestments through
public offerings.

15. 2. MAJORITY DISINVESTMENT
• Sells a majority share of the government-owned company.
• Based on strategic considerations of the government based on
futuristic policy.
• The majority of disinvestments are made in favour of other
government-owned companies.
• Eg:- After the government disinvestment from the Chennai Petroleum
Corporation Limited, formerly known as Madras Refineries Limited, it
became a group company of Indian Oil Corporation.
• The concept is to pool resources within a corporation, resulting in
increased operational efficiency.

16. 3. COMPLETE PRIVATISATION
• Type of majority disinvestment
• Company’s whole ownership is transferred to a buyer.
• Eg:- ITDC’s 18 hotel properties and HCI’s three hotel properties

17. Mode OF DISINVESTMENT
Initial Public
Offering
(IPO)
offer of shares by an unlisted PSU to the public
for the first time.
Minority Disinvestment
Follow – On
public
offering
(FPO)
Further Public Offering as it is an offer of shares
by a listed PSU.
Additional shares offered by a company after an
initial public offering (IPO).
Secondary Offering
Minority Disinvestment
Offer for sale Shares of a PSU are auctioned Minority Disinvestment (2012)
Institutional
Placement
Programme
(IPP)
Only financial institutions are permitted
Example,mutual funds, insurance, and pension
funds such as LIC.
Minority Disinvestment
Cross
holding
One listed PSU takes up the government stake in
another listed PSU.
It can lead to double-counting,
Minority Disinvestment

18. Golden share The Government will continue to be
the dominant shareholder with a 26
per cent stake.
Majority Disinvestment
Strategic Sales 50% or more, as well as the transfer
of managerial control.
Majority Disinvestment

19. CRITICISM OF DISINVESTMENT
• Disinvestment has only become a means for the government to raise funds. There
is little emphasis on PSU reform.
• With the government’s dominant ownership intact, the public firms will continue
to function with the same inefficient and ineffective culture as before.
• After disinvestment, the government has fewer shares in profitable companies.
• As a result the government’s dividend income will decrease and consequently, this
increases the Fiscal deficit.
• According to socialists, the private sector is incapable of achieving an equitable
distribution of resources and inclusive growth as profit maximization is the
exclusive objective of private entities.
• Poor people will remain poor and can not be served. As a result, the government
must exert control over all or in some parts of the industrial sector.

20. • Disinvestment in strategic companies such as in oil PSUs is a threat
to national security.
• Employees of PSUs will lose their jobs as a result of disinvestment.
• If the directors of the company include numerous private sector
specialists, they may support plans to reduce workers in order to
boost earnings.

21. CURRENT DISINVESTMENT POLICY (2021-2022)
• The current government has set an ambitious disinvestment target of
Rs. 1,75,000 crore for 2021-22.
• Through sales of shares in public sector enterprises and financial
institutions, including two PSU banks and one insurance company, this
target will be achieved.
• Required legislative amendments will take place for LIC IPO, as it is
considered as a master stroke by the government in the insurance
sector.