What is privatization?
Privatization primarily is the process of transferring ownership of a business, enterprise, agency, public service, or public property from the public sector (a government) to the private sector, either to a business that operates for profit or to a nonprofit organization.
It may also mean the government outsourcing of services or functions to private firms, for example, revenue collection, law enforcement, and prison management.
Privatization can also refer to the act of transferring ownership of specified property or business operations from a government organization to a privately owned entity, as well as the transition of ownership from a publicly traded, or owned, company to a privately owned company. For a company to be considered privately owned, it cannot secure funding through public trades on a stock exchange.
What is anti-profiteering?
The Anti-Profiteering Rules, 2017
- prevent entities from making excessive profits due to the GST.
- Since the GST, along with the input tax credit, is eventually expected to bring down prices,
- a National Anti-profiteering Authority (NAA) is to be set up to ensure that the benefits that accrue to entities due to reduction in costs is passed on to the consumers.
- Also, entities that hike rates inordinately, citing GST as the reason, will be checked by this body.
Once the registered entity, which has profiteered illegally, is identified, it can be asked to
- reduce prices if it has hiked prices too much and
- two, if price reduction due to GST has not been passed on to customers, to return to the customer the sum equivalent to the price reduction along with 18 per cent interest from the date the higher sum was collected.
The authority can impose penalty on the profiteer or cancel its registration.
(Profit is fine, profiteering is not. Don’t let someone profiteer at your expense).
In the Indian context, one thing is common to both the public and the private sector enterprises:
- barring a few exceptions in the private sector, there has been no separation of ownership and management.
Owners of private sector have treated their enterprises as an extension of their personal wealth.
The only difference is that in the case of the public sector, the real owners are the taxpayers and the government is the agent but the bureaucrats and politicians have enriched themselves through public sector enterprises at the expense of the ultimate owner, the taxpayer. Air India is, indeed, a case in point.
despite the personal enrichment of many promoters at the expense of their firms, the nature of ownership matters to the operating culture of commercial enterprises.
The below given qualities are likely to prevail in the private sector than in firms that are majority-owned by the government.
- the incentive to improve productivity and profitability and
- the accountability for doing so
libertarian economic affairs
- the natural order of economic affairs is wholly libertarian—free of regulation.
- Human greed and possessiveness allowed “government” to emerge.
- Naturally, laws, rules and regulations were needed to confer and protect title and provide physical security to property.
- But it is always desirable for humanity to operate closer to what nature ordained.
- So, the government’s job is to allow the self-organizing principle of human ingenuity and societies to play out and remove the hurdles
India has moved a long way away from this organizing principle of economic activity. Probably, the anti-profiteering authority is its pinnacle. The privatization of Air India should mark the beginning of the reversal of this trend.