Is Privatization Lead to Less Corruption? Presented By: Ravisha Sethi
Meaning Of PrivatizationO Privatization is the process of participation of private sector in the ownership and management of public sector.O The term "privatization" also has been used to describe two unrelated transactions. The first is a buyout, by the majority owner, of all shares of a public corporation or holding companys stock, privatizing a publicly traded stock, and often described as private equity. The second is a demutualization of a mutual organization or cooperative to form a joint stock company.
Privatization was introduced during the eighties by Rajiv Gandhi The government of P.V. Narsimha Rao gave actual speed by introducing the New Industrial Policy
Out of 16 industries, 6 industries are not reservedfor private sector. They areCigarette Atomic Indian Energy Railways 4
Arms and AmmunitionChemical HazardousFertilizers Chemicals 5
Methods Of Privatization Sale of the entire entity : The government sells the entire public sector unit to private sector. Initial public offering :The government issues shares to the public offering to reduce government stakes. 6
Management Control : Though not theprivate company the government transfers themanagement control to the new company to make itmoreaccountable. Sale to Employees : Employees have the first choice to buy the shares of the shares of public limited company when they are put for sale. 7
ExamplesO BSCS was privatized today it is owned by Reliance energyO Telephone companies now are owned by private companies also. 8
Hindustan and Bharatpetroleum planning to be apart of Oman oil company tohave a great supply of oil toIndia in lower price. 9
Positive Effects of Privatization.O Better services to the consumers.O Use of updated technology which helps to reduce wastage 10
O Helps in infrastructure development with the help of taxes received from business firms.O Helps the government to concentrate on social problem 11
Negative Effects of PrivatizationO Investment in industries of comfort and luxurious products instead of necessary products and problem of optimum use of capacity 12
Aims at makingprofit whichadversely affect theinterest of thecommunity.Problem ofunemployment. 13
Market share of privatization isincreasing year by year. 14
Does India need more privatization?O The central government owns public sector units which have accumulated losses of Rs.52,551 crore losses that India can no longer afford. Also that shareholders are getting less return on their investment. So, India needs to private more industries. 15
Governments role in privatization.O Government acts as a referee protecting both the consumers and the investors. Government protects the consumers from unwarranted prices. 16
Impact Of Privatization On:O Banking.O Insurance.O Education.
Impact Of Privatization On Banking SectorO SBI enjoys a monopoly of the government business.O The government hold around 93% of the equity, leaving 7% to private ownership.O This act was outdated and needs to be re- addressed.
O Later Indian government announced its decision to reduce its stakes in public sector banks to 33%.O Are the banks really sicks? The answer is No. The public sectors are making profits.Then why this outcry of privatisation ???
Why…Need of Privatization ???O In early 80s, the Banking Sector in India was dominated by the public sector banks which were characterized by:O High Intermediation Costs.O Over-staffing and Over-branching.O Huge portfolio of Non performing Loans.O Poor Customer Services.O Undercapitalized.O Poorly Managed / Narrow Product Range
Rationale for PrivatizationO Reduction in fiscal deficit.O Increase in the efficiency levels.O To foster competition.O Broad basing of equity capital.
O Releasing resources for physical and social infrastructure.O So the need was felt to put some control over the activities of the Nationalize banks.O Privatization of banks was one such action.O Example : ICICI Bank
Benefits of PrivatizationO There was a great increase in the no. of bank branches after privatization from 8262 to 45,898.O Branches in rural/semi-urban sectors increases from 2% to 40% after privatization.O Credit to agriculture increases from Rs.162 crore to Rs.4,46,496 crore.
O More job opportunities raise after privatization which leads to increase in staff from 2,20,000 to 9,65,720.O Because of credit misallocation, public sector banks may be a bigger threat to stability than private banks.O Private sector bank loans growth is faster as compared to public sector banks.
O There was a great increase in the efficiency of the private banksas the control over bank employees increases.O Private sector banks provide many additional services to its customers.
Impact Of Privatization On Insurance:O Government stakes in the insurance companies to be Brought down to be 5%.O Private companies with a minimum paid up capital of 1 billion.O 26% equity Capital.
List of Private Players in Life InsuranceO ICICI Prudential Life InsuranceO Birla Sun LifeO SBI LifeO Tata AIG LifeO Aviva Life InsuranceO Kotak Mahindra Life InsuranceO Bajaj Allianz LifeO Ing Vyasya Life Insurance
List of Private Players in General InsuranceO Bajaj Allianz General Insurance.O ICICI Lombard General Insurance.O IFFCO Tokio General Insurance.O Reliance General Insurance.O Royal Sundaram General Insurance.O Tata AIG General Insurance.O Cholamandalam MS General Insurance.O Export Credit Guarantee Corporation.
BenefitsO Fast Growth.O Rise of Premium income by 16%.O Tie ups with banks.
CausesO Growing importance of knowledge based economy.O The advent of new technologies.O Decline in quality of public sector.O Change in public attitude towards education.O Decline of public trust in public sector.