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Privatisation -bst.pdf
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- 2. —Definition The transfer ofownership, property or business from the government to the private sector.
- 3. TABLE OF CONTENT CHARACTERISTICS 03. METHODS 04. MEANING 01. OBJECTIVES 02. Whatis privatisation? What are examples of it in India and the UAE? What are the aims of privatisation? What are the features? What are the methods and ways in which privatisation happens?
- 4. TABLE OF CONTENT ADVANTAGES 05. Whatare the pros of privatisation? How does it help us? DISADVANTAGES 06. What are the cons of privatisation?
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- 6. What is Privatisation? Privatizationrefers to the process of transferring ownership or control of the government assets, firms, and operations to the private investors. This process of transfer takes the form of issue and sale or outright distribution of shares to the general public. The term privatisation includes other policies such as “Outsourced” which is the process by activities while publicly organized or funded by the Govt. can be carried out by private sector companies. E.g: Garbage collection, Street planning, Housing, etc.
- 7. Examples of privatisation InIndia ● Privatization of Bharat Aluminum Company in 2005 ● Privatization of Delhi and Mumbai airports in 2006 In UAE ● Privatisation of assets belonging to the Federal Electricity and Water Authority (Fewa) in 2007
- 8. Let us lookat the why of privatisation. OBJECTIVES 02.
- 9. IMPROVED EFFICIENCY Government enterprisesare mostly affected by political motives rather than economic well-being. It hinders the efficiency of public sector companies and prevents growth. Privatisation prevents this.They are more concerned with promoting development and efficiency inside a business in order to increase revenue. INCREASED COMPETITION Often privatisation of state-owned organisations occurs alongside deregulation – i.e. policies to allow more firms to enter the industry and increase the competitiveness of the market. It is this increase in competition that can be the greatest motivation to improvements in efficiency. For example, there is now more competitio in the distribution of gas and electricity.
- 10. Promotes Market Dynamism Privatizationreleases the economy from state control. Due to a lack of government interference, the market becomes more dynamic and follows basic economic values of demand and supply. Consumer response to a more dynamic and naturally run market is greater and generates higher revenue. Revenue from the Sale of a Company A primary objective of privatization is a one-tim revenue generation for the government. Several governments have previously resorted to privatization when facing a financial crisis.
- 11. Let us lookat the features of privatisation. CHARACTERISTICS 03.
- 12. Transfer of Ownership Inprivatization, ownership of a company, undertaking or property is transferred to the private sector. Lack of Government Interference Privatization reduces indulgence and interference of the state in the activities of a company. Economic Democracy Privatization weakens state monopoly and allows private companies to participate in economic activities more democratically.
- 13. There are 5main methods of privatisation. METHODS 04.
- 14. Public auctions areheld with the motive of raising the highest amount for a government-owned property. Shares of a public company or long-term assets can be auctioned through this route. PUBLIC AUCTION SALE OF SHARES Equity shares of a public sector company or undertaking can be sold through stock exchanges for privatization. The state hands over complete authority of an organization’s economic activities through a public sale of shares.
- 15. DIRECT NEGOTIATIONS When thegovernment enters into dealings with specific private bodies for carrying out the privatization of state-owned property, it is called ‘direct negotiation’. Direct negotiations are potentially more beneficial for participating bodies as both the seller and purchaser are present and agree on necessary and advantageous conditions. PUBLIC TENDER It refers to a contract issued to attract offers from interested procurers. A tender is essentially like an auction where the bidder with the most profitable offer obtain it. The process that follows public tender for the privatization of government property is similar to direct negotiations. Except in direct negotiations, there are already selected purchasers who can participate in the dealing. In a public auction, there are no such provisions.
- 16. LEASE WITH A RIGHT TO PURCHASE Underthis method, a private company only assumes possession and usage of a state-run company or undertaking by meeting certain criteria. The private company can later choose to exercise the option to convert the lease of a property to ownership by paying the necessary sum and following certain stipulations. It can also be said that the public company is being “rent” by the private company.
- 17. Let’s look atthe pros of privatisation ADVANTAGES 05.
- 18. Improved Performance Private companiesare profit-incentivized rather than politically motivated. Privatization, therefore, allows companies to become more efficient by eliminating unnecessary elements within an organization like overwhelming bureaucracy & red tape. Moreover, private companies assess their employees based on their performance and adequately incentivize better performance. This factor encourages overall performance in an organization. Bureaucracy- A system of govt in which most decisions are made by state officials rather than elected representatives. Red tape- Excessively complicated administrative process. Incentivize- Motivate or encourage to do something.
- 19. Better Customer service Asprivate companies are profit-driven and function in a competitive market, their primary focus rests on efficient customer service. State-run companies lack this feature as they face no competition and are not financially motivated. Furthermore, customer service is enhanced in privatization due to the elimination of unnecessary bureaucratic hassle.
- 20. Improved management Privatization enhancesmanagement of a company. As managers of a privately-owned organization are accountable to the company’s owners, it becomes their responsibility to ensure efficient management. This factor of accountability is less intense in public sector companies which results in poor and inefficient operations that may ultimately harm the economy.
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- 22. Issues of RegulatingMonopolies The private sector can manipulate their monopoly and neglect social costs. Privatization of certain state industries such as water and electricity regulators may create only single monopolies. Monopoly A person or group having complete control over something
- 23. Public Interest The profitmotive should not be the primary objective for the industry which performs an important public service, e.g. health care, education, and public transport. According to the researchers, the private sector in India has grown independently without any major regulation; In the hands of Private health sector, some private practitioners are not even registered doctors and are referred to as quacks.
- 24. Accountability The public doesnot have any control or administration of private companies. Privatization has a bad effect on accountability because Investors retain full authority to do anything.
- 25. CREDITS: This presentationtemplate was created by Slidesgo, including icons by Flaticon, and infographics & images by Freepik THANK YOU!! Please keep this slide for attribution