Question

What is meant by privatization? Explain briefly four problems of public sector undertakings in India.

Answer 1

The transfer of ownership, property or business from the government to the private sector is termed privatization. The government ceases to be the owner of the entity or business.

Major problems faced by the public sector undertakings in India:

(i) Under-Utilisation of Capacity: Under-utilisation of the production capacities is one of the common constraints from which almost all public sector enterprises are suffering.

(ii) Technological Gap: Some of the public sector enterprises in India are suffering from technological gap as these enterprises could not own up-to-date technologies in their production system leading to high unit cost and lower yield.

(iii) Operational and Managerial Inadequacies: The public sector enterprises in India are also suffering from operational and managerial inadequacies and inefficiencies leading to huge wastages and leakages of funds in their day-to-day activities.

(iv) Government Interference: Much government interference in the day to day activities of the public sector enterprises has reduced the degree of autonomy of the management in respect of employment, pricing, purchase etc.