Privatization is considered to bring more efficiency and objectivity to the company, something that a government company is not concerned about. India went for privatization in the historic reforms budget of 1991, also known as 'New Economic Policy or LPG policy'.
2. Meaning of Privatization
It means a transfer of ownership, management, and control of
public sector enterprises to the private sector. Privatization can
suggest several things including migrating something from the
public sector into the private sector.
Some instances involves law enforcement, revenue collection,
and prison management.
3. Why Privatization?
■ To reduce government involvement in commercially viable activity,
■ Increase efficiency in the delivery of programs and services.
■ Provides competition in market place which transfers the lower
price and greater choice for the customers.
Characteristics of Privatization
■ Individual’s and company ownership
■ No control of government
■ Different field
■ Good alternative
4. Objectives of Privatization
Increasing efficiency
Developing a market- oriented industry
Ensuring Stakeholder support
Developing the local stock market
Building confidence in the program
Maximizing proceeds
Eliminating soft lending
To earn more & more foreign currency.
5. Method of Privatization
■ Competitive Bidding
■ Public Flotation of Shares
■ Private Placement
■ Dilution of Capital
■ Management Employee Buyout
■ Mass Privatization
6. Advantage of Privitazition
■ Increase competition
■ Immunity from political
■ Tax reduction and job creation
■ Industrial growth
■ Increase the foreign investment
7. Disadvantage of Privatization
■ Investment in industries of comfort and luxurious
products instead of necessary products and problem of
optimum use of capacity
■ Aims at making profit which adversely affect the
interest of the community.
■ The private companies don’t like to have their branches
in ruler cities.
■ Problem of unemployment.
■ Higher costs to consumers
■ Lack of welfare
8. Conclusion
Privatization encompasses a variety of techniques for shifting
functions that have traditionally been wholly in the public sector
into the private sector to various degrees. Thus through
privatization is very important, the role of public sector cannot
be ignored to ensure emphasis on not only economic growth but
also to ensure its sustainability and development of economy in a
unified and comprehensive manner.
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