{"id":167877,"date":"2022-02-11T09:00:42","date_gmt":"2022-02-11T03:30:42","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=167877"},"modified":"2022-02-10T23:34:11","modified_gmt":"2022-02-10T18:04:11","slug":"answered-how-far-in-your-opinion-privatisation-has-been-able-to-achieve-its-intended-objectives","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/answered-how-far-in-your-opinion-privatisation-has-been-able-to-achieve-its-intended-objectives\/","title":{"rendered":"[Answered] How far, in your opinion, privatisation has been able to achieve its intended objectives?"},"content":{"rendered":"<table style=\"border-collapse: collapse; width: 100%;\">\n<tbody>\n<tr>\n<td style=\"width: 100%;\"><b><span data-contrast=\"none\">Introduction: <\/span><\/b><span data-contrast=\"none\">Define privatisation and give context of privatisation in India.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559740&quot;:259}\"><br \/>\n<\/span><b><span data-contrast=\"none\">Body: <\/span><\/b><span data-contrast=\"none\">Write the objectives, Benefits and concerns of privatisation in India.\u00a0<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559740&quot;:259}\"><br \/>\n<\/span><b><span data-contrast=\"none\">Conclusion: <\/span><\/b><span data-contrast=\"none\">Conclude giving a way forward.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559740&quot;:259}\">\u00a0<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><span data-contrast=\"none\">Privatisation means <\/span><b><span data-contrast=\"none\">transfer of firms from the Public to Private Sector <\/span><\/b><span data-contrast=\"none\">through the transfer of ownership, management and control.\u00a0<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:1,&quot;335551620&quot;:1,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"none\">India adopted a mixed economy model, where the Public Sector Enterprises (PSEs) were established on a <\/span><b><span data-contrast=\"none\">socialistic pattern of development. <\/span><\/b><span data-contrast=\"none\">However, due to the poor performance of several PSEs and the consequent huge fiscal deficits, privatization was pursued.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:1,&quot;335551620&quot;:1,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"none\">Privatisation was intended to achieve the following objectives.\u00a0<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:1,&quot;335551620&quot;:1,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<ul>\n<li><b><span data-contrast=\"none\">Improve the efficiency and financial discipline<\/span><\/b><span data-contrast=\"none\"> of PSEs.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:1,&quot;335551620&quot;:1,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<li><b><span data-contrast=\"none\">Facilitate modernization<\/span><\/b><span data-contrast=\"none\"> of PSEs.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:1,&quot;335551620&quot;:1,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<li><b><span data-contrast=\"none\">Reduce fiscal burden on government<\/span><\/b><span data-contrast=\"none\"> in maintaining PSEs.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:1,&quot;335551620&quot;:1,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<li><span data-contrast=\"none\">Attract <\/span><b><span data-contrast=\"none\">Foreign Investment<\/span><\/b><span data-contrast=\"none\">.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:1,&quot;335551620&quot;:1,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<li><span data-contrast=\"none\">Signal to the market that government is promoting free-market principle.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:1,&quot;335551620&quot;:1,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<\/ul>\n<p><span data-contrast=\"none\">The Privatization exercise in India has been a mixed experience. The privatization drive picked the pace between 1999 and 2004. Many big companies like Maruti Udyog were privatized at that time and most recently Air India was privatised.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:1,&quot;335551620&quot;:1,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<ul>\n<li data-leveltext=\"\uf0b7\" data-font=\"Symbol\" data-listid=\"1\" aria-setsize=\"-1\" data-aria-posinset=\"1\" data-aria-level=\"1\"><span data-contrast=\"none\">These companies have performed well since their privatisation. For example, Hindustan Zinc is now worth Rs 40,000 crore and government still holds a 29.5% stake. Thus, the government has benefitted from these companies.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:1,&quot;335551620&quot;:1,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<li data-leveltext=\"\uf0b7\" data-font=\"Symbol\" data-listid=\"1\" aria-setsize=\"-1\" data-aria-posinset=\"2\" data-aria-level=\"1\"><span data-contrast=\"none\">It led to <\/span><b><span data-contrast=\"none\">optimum utilization of resources<\/span><\/b><span data-contrast=\"none\"> of the economy, which were being spent on maintaining PSUs. It helps in fiscal consolidation of the economy.\u00a0\u00a0<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:1,&quot;335551620&quot;:1,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<li data-leveltext=\"\uf0b7\" data-font=\"Symbol\" data-listid=\"1\" aria-setsize=\"-1\" data-aria-posinset=\"3\" data-aria-level=\"1\"><span data-contrast=\"none\">It <\/span><b><span data-contrast=\"none\">fostered competition<\/span><\/b><span data-contrast=\"none\"> in sectors monopolized by the PSEs leading to better services to consumers. For example, Maruti Suzuki has 50% share of the market at present.\u00a0<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:1,&quot;335551620&quot;:1,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<li data-leveltext=\"\uf0b7\" data-font=\"Symbol\" data-listid=\"1\" aria-setsize=\"-1\" data-aria-posinset=\"4\" data-aria-level=\"1\"><span data-contrast=\"none\">It <\/span><b><span data-contrast=\"none\">reduces political interference and bureaucratic delays<\/span><\/b><span data-contrast=\"none\"> in the functioning of the enterprises. Which raises the overall efficiency of the economy.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:1,&quot;335551620&quot;:1,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<li data-leveltext=\"\uf0b7\" data-font=\"Symbol\" data-listid=\"1\" aria-setsize=\"-1\" data-aria-posinset=\"5\" data-aria-level=\"1\"><span data-contrast=\"none\">It <\/span><b><span data-contrast=\"none\">increased democratization of the economy<\/span><\/b><span data-contrast=\"none\">, with more participation from common citizens.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:1,&quot;335551620&quot;:1,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<\/ul>\n<p><span data-contrast=\"none\">However, there are several concerns with the privatization exercise<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:1,&quot;335551620&quot;:1,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<ul>\n<li><b><span data-contrast=\"none\">Social justice<\/span><\/b><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:1,&quot;335551620&quot;:1,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span>\n<ul>\n<li><span data-contrast=\"none\">Privatization undermines the development of backward regions that are not economically viable.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:1,&quot;335551620&quot;:1,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<li><span data-contrast=\"none\">The public sector provides employment to historically backward section under affirmative action, privatization will hinder affirmative action.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:1,&quot;335551620&quot;:1,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<\/ul>\n<\/li>\n<li><b><span data-contrast=\"none\">Employment<\/span><\/b><span data-contrast=\"none\">: The Central Public sector India <\/span><b><span data-contrast=\"none\">provides employment to over 1 million people<\/span><\/b><span data-contrast=\"none\">, privatizing PSE may lead to mass layoffs in the when job creation is low.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:1,&quot;335551620&quot;:1,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<li><b><span data-contrast=\"none\">Loss of revenue<\/span><\/b><span data-contrast=\"none\">: Loss-making entities are not attractive for the private sector. However, selling profit-making and dividend-paying PSU would result in loss of a regular source of income to the government. In 2020-21, when the pandemic struck the economy, 45 PSU companies paid dividends of more than Rs 46,000 crore to the government.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:1,&quot;335551620&quot;:1,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<li><b><span data-contrast=\"none\">Strategic and national security concerns<\/span><\/b><span data-contrast=\"none\">: Privatizing PSUs in strategic sectors, like Oil, may threaten our strategic goals. For example, <\/span><b><span data-contrast=\"none\">the attempt to privatise BPCL<\/span><\/b><span data-contrast=\"none\">.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:1,&quot;335551620&quot;:1,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<li><b><span data-contrast=\"none\">Failure in Resource mobilisation: <\/span><\/b><span data-contrast=\"none\">The government has not been successful in achieving the disinvestment targets in many fiscal years. I<\/span><span data-contrast=\"none\">n FY11, \u20b922,846 crore was raised against a target of \u20b940,000 crore; by <\/span><b><span data-contrast=\"none\">FY20, \u20b950,304 crore was raised against a target of \u20b91 lakh crore.\u00a0\u00a0<\/span><\/b><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:1,&quot;335551620&quot;:1,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<li><b><span data-contrast=\"none\">Short term solution to fiscal needs<\/span><\/b><span data-contrast=\"none\">: Privatization with the aim to finance fiscal deficits is only a short-term solution and does not solve the bigger issue of mismanagement.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:1,&quot;335551620&quot;:1,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<li><b><span data-contrast=\"none\">Creation of private oligopolies<\/span><\/b><span data-contrast=\"none\">: With increased concentration of public assets in a few private hands will lead to higher costs to consumers and loss of strategic control with the Government. For example, <\/span><b><span data-contrast=\"none\">Telecom sector in India only has 3 major players left.<\/span><\/b><span data-contrast=\"none\">\u00a0<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:1,&quot;335551620&quot;:1,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<\/ul>\n<p><span data-contrast=\"none\">The present model of privatization may include the steps like de<\/span><b><span data-contrast=\"none\">-bureacratisation and greater autonomy, <\/span><\/b><span data-contrast=\"none\">especially for PSEs of strategic importance. The <\/span><b><span data-contrast=\"none\">revenue generated must be utilised for capital investment.<\/span><\/b><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:1,&quot;335551620&quot;:1,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"none\">India could follow the <\/span><b><span data-contrast=\"none\">example of Singapore<\/span><\/b><span data-contrast=\"none\">, where the government created <\/span><b><span data-contrast=\"none\">an independent body (Temasek holdings) to corporatize and developing public sector units<\/span><\/b><span data-contrast=\"none\">. Any policy on privatization must consider social and strategic benefits of PSUs apart from the economic benefits.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:1,&quot;335551620&quot;:1,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Introduction: Define privatisation and give context of privatisation in India. Body: Write the objectives, Benefits and concerns of privatisation in India.\u00a0 Conclusion: Conclude giving a way forward.\u00a0 Privatisation means transfer of firms from the Public to Private Sector through the transfer of ownership, management and control.\u00a0\u00a0 India adopted a mixed economy model, where the Public&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/answered-how-far-in-your-opinion-privatisation-has-been-able-to-achieve-its-intended-objectives\/\">Continue reading <span class=\"screen-reader-text\">[Answered] How far, in your opinion, privatisation has been able to achieve its intended objectives?<\/span><\/a><\/p>\n","protected":false},"author":10320,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[139,25,9],"tags":[2746,9990],"class_list":["post-167877","post","type-post","status-publish","format-standard","hentry","category-mains-marathon","category-mains-marathon-answers","category-public","tag-private-sector","tag-privatisation","entry"],"jetpack_featured_media_url":"","views":{"total":6,"cached_at":"","cached_date":1698373284},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/167877","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10320"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=167877"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/167877\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=167877"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=167877"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=167877"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}