Privatisation of public sector


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Basic concepts of privatisation -presentation for mba

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  • Privatisation of public sector

    1. 1. <ul><li> Privatization </li></ul><ul><li> of </li></ul><ul><li>Public Sector </li></ul><ul><li>BY </li></ul><ul><li> M. VANI PRASUNA </li></ul>
    2. 2. Issues in Privatization <ul><li>What is privatization? </li></ul><ul><li>What are the modes of privatization? </li></ul><ul><li>What are the reasons for privatization? </li></ul><ul><li>What are the problems of privatization </li></ul>
    3. 3. What is privatization? <ul><li>Transfer of ownership from the Public to Private sector. </li></ul><ul><li>Transfer of Management of an Enterprise from the Public to Private sector. </li></ul><ul><li>Withdrawal of the State from an Industry or Sector PARTIALLY or FULLY. </li></ul>
    4. 4. Another Dimension of Privatization <ul><li>Opening up of an industry that has been reserved for the Public sector to the Private sector including governmental functions like revenue collection and law enforcement. </li></ul>
    5. 5. Modes of Privatization <ul><li>Sale of an Enterprise </li></ul><ul><li>Privatization a global phenomenon </li></ul><ul><li>Improves operating and financial performance </li></ul><ul><li>Lease of Entity </li></ul><ul><li>Joint ventures </li></ul><ul><li>Public share offers: </li></ul>
    6. 6. The methods of Privatization adopted by Government <ul><li>Strategic sale by auction method </li></ul><ul><li>Generous pay & benefits </li></ul><ul><ul><li>At lower levels in particular </li></ul></ul><ul><ul><li>Overtime </li></ul></ul><ul><li>Offer of shares through a Public offering both domestic and global, which may or may not involve a change in ownership/management </li></ul>
    7. 7. Reasons for Privatization <ul><li>To reduce the burden on Government </li></ul><ul><li>To strengthen competition </li></ul><ul><li>To improve Public finances </li></ul><ul><li>To fund infrastructure growth </li></ul><ul><li>Accountability to shareholders </li></ul><ul><li>To reduce unnecessary interference </li></ul><ul><li>More disciplined labor force. </li></ul>
    8. 8. Problems in Privatization <ul><li>Ownership to a privileged few </li></ul><ul><ul><li>The payer could suffer while public assets get sold off. </li></ul></ul><ul><ul><li>Ownership would be transferred from public hands to the private firms </li></ul></ul><ul><li>Restructuring </li></ul><ul><ul><li>Timing and menu of options </li></ul></ul><ul><li>Social Safety Net </li></ul><ul><ul><li>Severance, retraining, public works </li></ul></ul>
    9. 9. conti… <ul><li>Managing the Process </li></ul><ul><ul><li>Consultation and participation </li></ul></ul><ul><li>Laborers would be at the mercy of the private owners </li></ul><ul><li>Loss of experienced managerial expertise </li></ul><ul><li>Short-term gain, Long-term loss </li></ul>
    10. 10. Alternatives to total privatization <ul><li>Public Utility: The enterprise can remain as a public utility </li></ul><ul><li>Non-Profit: The enterprise could be managed by a private non-profit organization. </li></ul><ul><li>Bankruptcy: State can wait until the enterprise becomes bankrupt. </li></ul>
    11. 11. Accomplishments of Privatization <ul><li>The best way to rebuild weakened Public sectors. </li></ul><ul><li>Stops loss making public sector from adding to government debt. </li></ul><ul><li>Raises more money for government through taxing. </li></ul><ul><li>Expands an enterprise and an industry. </li></ul><ul><li>Creates more jobs and generating wealth for the country. </li></ul>
    12. 12. Timing and Sequencing of Labor Restructuring <ul><li>Complicates negotiations </li></ul><ul><li>Pragmatic </li></ul><ul><li>Joint decisions </li></ul><ul><li>Mixed approach </li></ul><ul><li>Delays </li></ul><ul><li>Wrong results </li></ul><ul><li>Dispute settlement </li></ul><ul><li>Safety net </li></ul><ul><li>Restructure first </li></ul><ul><li>Political/social considerations </li></ul><ul><li>Lower value </li></ul><ul><li>Market based </li></ul><ul><li>Speed </li></ul><ul><li>Leave to private sector </li></ul>Cons Pros Options
    13. 13. Social Safety Net Options <ul><li>Dependence </li></ul><ul><li>Sustainability </li></ul><ul><li>Temp empt. </li></ul><ul><li>Basic infrastr. </li></ul><ul><li>Public works </li></ul><ul><li>Mixed expce. </li></ul><ul><li>Inst’l demands </li></ul><ul><li>Weak labor mkts. </li></ul><ul><li>Investment in human capital </li></ul><ul><li>Politically and socially desirable </li></ul><ul><li>Retraining/ redeployment </li></ul><ul><li>Cost and financing </li></ul><ul><li>Adverse selection </li></ul><ul><li>Income support </li></ul><ul><li>Compensation </li></ul><ul><li>High returns </li></ul><ul><li>Severance pay </li></ul>Cons Pros Options
    14. 14. Aim of Privatization <ul><li>The aim of privatization is : </li></ul><ul><li>To achieve higher micro-economic efficiency and foster economic growth, as well as reduce public sector borrowing requirements through the elimination of unnecessary subsidies. </li></ul>
    15. 15. Notable privatizations <ul><li>The largest privatization in history was Japan Post because it was thought to be an inefficient and a source for corruption. </li></ul><ul><li>Japan Post was often said to be the largest holder of personal savings in the world. </li></ul><ul><li>Nippon Telegraph and Telephone's privatization in 1987 was the largest share offering in financial history at the time. 15 of the world's 20 largest public share offerings have been privatizations of telecoms. </li></ul>
    16. 16. Does Andhra Pradesh Need more Privatization <ul><li>Absolutely! And the sooner the better! </li></ul><ul><li>AP government’s owned enterprises have so far accumulated losses of Rs.1,984 crores. </li></ul><ul><li>The Losses have to be paid by public taxes today </li></ul><ul><li>Privatized companies become efficient and profitable, they will start paying taxes instead of consuming taxes </li></ul>
    17. 17. Does privatization create or destroy jobs? <ul><li>World bank experts have studied privatizations around the world and found that in the vast majority employment increased not decreased. </li></ul>
    18. 18. Conclusion <ul><li>From the moment we are born, almost all change is difficult nobody really enjoys change. </li></ul><ul><li>Labors will be initially uneasy, facing problems with new owners and new ways of working together changing the habits of a lifetime always entails some uncertainty and discomfort. </li></ul><ul><li>In order for our economy to grow and for our children to be freed from debt and allowed to enjoy greater opportunities Privatization is must as it will help our state as well as country grow stronger </li></ul><ul><li>It is not the business of the government to do business </li></ul>