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Privatisation and disinvestment


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This presentation gives a basic view on the meaning of Privatisation and Disinvestment.

Published in: Economy & Finance

Privatisation and disinvestment

  1. 1. PRIVATIZATION AND DISINVESTMENT Submitted By – Pragati Mehndiratta
  2. 2. Business Environment Business environment is a combination of all factors that influence a business.
  3. 3. Introduction  Before 1947, activities of public sector were restrict ed to a limited field like irrigation, power, railways, ports, communications and some departmental undertakings.  After Independence, the area of activities of the publ ic sector expanded at a very rapid speed.  Industrial policy resolutions of 1948 & 1956 ensured that the activities of the private sector will not be curbe d.
  4. 4. Introduction  These polices divided the economy broadly into two. Some activities were left for public sector, some for both public and private sector, and some entirely for private sector.
  5. 5. Privatization  Privatization means transfer of ownership and or management of enterprise from publi c sector to private sector.  Privatization the transfer of ownership of State Owned Enterprises (SoE) to the priva te sector by sale (full or partial) of going con cerns or by sale of assets after the liquidatio n of the company - World Bank
  6. 6. Privatization - History The seeds were laid in the UK in 1960s. First mentioned in 1960 in the book : The Age of Discontinuity by Peter Drucker. Spread in 1970 by the then PM Margaret Thatcher.
  7. 7. Privatization - Objectives To increase efficiency & competitive power of the enterprises. To strengthen industrial management. To earn more & more Foreign currency. To make optimum use of resources. To achieve rapid industrial development of the country.
  8. 8. Privatization - Advantages Reduction in economic burden Increase in efficiency Reduction in sense of irresponsibility Scientific Management Reduction in Political Interference
  9. 9. Privatization - Disadvantages Lack of social welfare Class struggle Increase in inequality Increase in unemployment Exploitation of weaker section
  10. 10. Disinvestment The action of an organisation or government selling or liquidating an asset or subsidiary
  11. 11. Disinvestment - Objectives  To reduce the financial burden on gover nment.  To improve public finances  To introduce, competition and market discipline  To increase growth of the firm  To encourage wider share of ownership
  12. 12. Disinvestment - History The Indian economy had virtually embraced bankruptcy during the period of 1980-92. In 1991, there was 236 operating public sec tor undertakings, of which only 123 were profit making. The top 20 profit making PSU’s were respo nsible for 80 percent of profits. The return on public sector investment for th e year 1990-91 was just over 2 percent.
  13. 13. Disinvestment - Advantages In Private Sector, the decision making process is quick. Better corporate governance, exposure to co mpetitive markets. Loss making PSUs can be revived which can boost up the economy.
  14. 14. Disinvestment - Disadvantages  Selling of profit-making PSU results in loss of regular source of income to the government.  Asset stripping by the strategic partner.  Disposal of profit making PSUs.
  15. 15. Questions?