Describe the industrial policy 1991, towards the public sector?
Describe the industrial policy 1991, towards the public sector?
The following are the major points that describe the industrial policy of 1991.
(a) Fall in the number of industries reserved for the public sector
Year
1956
1991
Number of industries reserved for the public sector
17
8
From the table above, it can be seen that the number of industries reserved for the public sector fell from 17 in 1956 to eight in 1991. This implies that in 1991, there were more industries in which the private sector could play a role, compared with 1956. In this way, the industrial policy of 1991 aimed at
(i) infusing competition (as the public sector had to compete with the private sector)
(ii) increasing the efficiency of public sector enterprises (PSEs), by facilitating stiff competition from the private sector
(b) Disinvestment of shares of the selected public sector enterprises (PSEs): For disinvestment from PSEs, the government reduced its stakes in these enterprises and aimed at encouraging greater participation of the private sector and the general public in industrial sectors. The following were the main rationale behind disinvestment.
(i) Divert resources to social priority areas: By disinvesting from PSEs (the less important ones), the government aimed at diverting funds from the less important PSEs to social priority areas, such as health and education, for improving the people’s welfare.
(ii) Transfer risk : Often, the funds allocated to PSEs had not been optimally utilised. This misutilisation of funds, together with bureaucratic corruption, led PSEs to incur heavy losses, which exerted an acute financial burden on the government. Therefore, by disinvesting from PSEs, the government aimed at shifting this commercial risk to the private sector, which would invest their funds only in feasible projects.
(iii) Reduce public debt: As the government did not have to allocate funds to PSEs where disinvestment had taken place, the need for incurring fresh public debts was reduced.
(iv) Introduction of corporate governance: Disinvestment helped the government to reduce its role in PSEs and encouraged the introduction of corporate governance. This made these enterprises work in a more disciplined and professional manner.
(c) Policies for sick PSEs: The Board of Industrial and Financial Reconstruction was assigned the task to evaluate the sick PSEs and decide whether they could be revived or should be shut down. The decision to shut down sick PSEs freed the government from intense financial pressure, as it no longer needed to financially support these units.
(d) Memorandum of Understanding (MoU): Under an MoU with sick PSEs, their managements were given greater freedom to operate and achieve specified targets. This led to the PSEs operating freely and efficiently.
The following are the major points that describe the industrial policy of 1991.
(a) Fall in the number of industries reserved for the public sector
|
Year |
1956 |
1991 |
|
Number of industries reserved for the public sector |
17 |
8 |
From the table above, it can be seen that the number of industries reserved for the public sector fell from 17 in 1956 to eight in 1991. This implies that in 1991, there were more industries in which the private sector could play a role, compared with 1956. In this way, the industrial policy of 1991 aimed at
(i) infusing competition (as the public sector had to compete with the private sector)
(ii) increasing the efficiency of public sector enterprises (PSEs), by facilitating stiff competition from the private sector
(b) Disinvestment of shares of the selected public sector enterprises (PSEs): For disinvestment from PSEs, the government reduced its stakes in these enterprises and aimed at encouraging greater participation of the private sector and the general public in industrial sectors. The following were the main rationale behind disinvestment.
(i) Divert resources to social priority areas: By disinvesting from PSEs (the less important ones), the government aimed at diverting funds from the less important PSEs to social priority areas, such as health and education, for improving the people’s welfare.
(ii) Transfer risk : Often, the funds allocated to PSEs had not been optimally utilised. This misutilisation of funds, together with bureaucratic corruption, led PSEs to incur heavy losses, which exerted an acute financial burden on the government. Therefore, by disinvesting from PSEs, the government aimed at shifting this commercial risk to the private sector, which would invest their funds only in feasible projects.
(iii) Reduce public debt: As the government did not have to allocate funds to PSEs where disinvestment had taken place, the need for incurring fresh public debts was reduced.
(iv) Introduction of corporate governance: Disinvestment helped the government to reduce its role in PSEs and encouraged the introduction of corporate governance. This made these enterprises work in a more disciplined and professional manner.
(c) Policies for sick PSEs: The Board of Industrial and Financial Reconstruction was assigned the task to evaluate the sick PSEs and decide whether they could be revived or should be shut down. The decision to shut down sick PSEs freed the government from intense financial pressure, as it no longer needed to financially support these units.
(d) Memorandum of Understanding (MoU): Under an MoU with sick PSEs, their managements were given greater freedom to operate and achieve specified targets. This led to the PSEs operating freely and efficiently.
