Privatisation in India - Examples

Meaning of Privatisation

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. It is also seldom used as a metonym for deregulation when a massively regulated private firm or industry becomes less organised. Government services and operations may also be (denationalised) privatized; in this circumstance, private entities are tasked with the application of government plans or execution of government assistance that had earlier been the vision of state-run companies. Some instances involve law enforcement, revenue collection, and prison management.

Privatisation of the public sector companies by selling off part of the equity of PSEs to the public is known as disinvestment.

Objectives of Privatisation:

Providing strong momentum to the inflow of FDI

  • Privatisation aims at providing a strong base to the inflow of FDI.
  • Increased inflow of FDI improves the financial strength of the economy.

Improving the efficiency of public sector undertaking (PSU’s)

  • The efficiency of PSU’s was improved by giving them the autonomy to make decisions.
  • Some companies were given a special category of Navratna and Mini-Ratna.

Ways of Privatisation

Government companies are transformed into private companies in 2 ways,

Transfer of Ownership

  • Government companies can be converted into private companies in two ways :
  • By withdrawal of the government from ownership and management of public sector companies.
  • By outright sale of public sector companies.

Disinvestment 

  • Privatisation of the public sector undertakings by selling off part of the equity of PSUs to the private sector is known as disinvestment.
  • The purpose of the sale is mainly to improve financial discipline and facilitate modernization.

However, there are six methods of Privatisation:

  • The public sale of shares
  • Public auction
  • Public tender
  • Direct negotiations
  • Transfer of control of State or municipally controlled enterprises
  • Lease with a right to purchase
Multiple Choice Question:
Q.1 Privatisation of the public sector undertakings by selling off part of the equity of PSUs to the private sector is known as_____________.
a. Privatisation

b. Origin of private sector

c. Disinvestment

d. None of the above

Q.2- Which of the following is the aim of Privatisation?
a. Providing strong momentum to the inflow of FDI

b. Improving the efficiency of PSU’s

c. Both (a) and (b)

d. None of the above

Q.3- ______________ means transfer of ownership, management and control of public sector enterprises to the private sector.
a. Liberalisation

b. Privatisation

c. Globalization

d. None of the above

Answer Key
1-a, 2-c , 3-b

 

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