Privatization: Dr. Shakuntala Misra National Rehabilitation University
Privatization: Dr. Shakuntala Misra National Rehabilitation University
Lucknow
Faculty of Law
PROJECT ON
‘PRIVATIZATION’
For
Submitted by
SHUBHAM PAL
B.Com.LL.B/2016-17/06
Roll NO-164140064
Faculty of Law
ACKNOWLEDGEMENT
CONTENT
1. History of Privatization
2. Nature of Privatization
3. Meaning of Privatization
4 Definition of Privatization
5. Objectives of Privatization
6. Privatization Routes
7. Techniques of Privatization
14. Conclusion
Page |4
PRIVATIZATION
HISTORY:
NATURE:
MEANING:
DEFINITION:
Objectives of Privatization:
Privatization routes:
1. Sale to outsiders:
This involves the sale of state enterprises, case by case, as going concerns
to outsiders. Sale to outsiders has been favored as it fetches revenue and turns the
firm to the real owners who possess the expertise and incentives to govern the
company efficiently.
The disadvantage of this is the insiders do not bring in new skills and
new capital. Here the government charges low prices to insiders and thus realize
little revenue.
3. Equal- access voucher privatization:
4. Spontaneous privatization:
Techniques of privatization
1. Government run industries cost more because they have larger burea-
ucracies.
2. Government run industries leave people with little choice in the market
place.
3. Privatization may limit access to certain industries for people who cannot
afford them.
4. The public has little control over a private industry, and decisions in that
industry may adversely affect those in the public sector.
Advantages of privatization
1. Improved Efficiency.
The main argument for privatization is that private companies have a profit
incentive to cut costs and be more efficient. If you work for a government firm,
managers do not usually share in any profits. However, a private firm is interested
in making profit and so it is more likely to cut costs.
4. Shareholders.
5. Increased Competition.
Disadvantages of Privatization:
2. Public monopolies have been turned into private monopolies with too little
competition, so consumers have not benefited as much as had been hoped. This is
the main reason why it has been necessary to create regulators. This is an
important point. It partly depends on how the privatization took place. For
example, the railways were privatized in bit of a rush and there might have been
other ways to do it so that more competition was created. It partly depends on the
market. Some markets are 'natural monopolies' where competition is difficult. For
example, it would be very wasteful and expensive to build two sets of track into
P a g e | 12
3. The nationalized industries were sold off too quickly and too cheaply. With
patience a better price could have been had with more beneficial results on the
government's revenue. In almost all cases the share prices rose sharply as soon as
dealing began after privatisation.
4. The privatized businesses have sold off or closed down unprofitable parts of the
business (as businesses normally do) and so services eg transport in rural areas
have got worse.
5. Wider share ownership did not really happen as many small investors took their
profits and didn't buy anything else.
Sins of privatization:
Harassed finance ministers are often tempted to sell state assets to cover
their current budget deficits.
Privatization in India
business. This has naturally exposed the hitherto cosseted public sector to
competition on a scale to which it has not been accustomed. Disinvestment, while
raising revenues for the government, has been perceived as necessary in order to
subject PSUs to market discipline and to ensure that they raise their standards of
performance. Disinvestment of equity in 40 PSUs has risen about Rs12 billion ($
2.8 bn) so far. Only profit-making enterprises have been offered for sale. In the
first round of
disinvestment, the government offered “bundles” of shares of various PSUs
(each bundle carrying a notional reserve price) to local institutions. Later, the
bidding process was opened to foreign institutional investors and the public at
large. The overwhelming chunk of funds raised through disinvestment (Rs9.9 bn)
has been through the auction route. The method of disinvestment was widened in
1996-97.
Conclusion:
The foregoing arguments do not in any way constitute uncritical support for our
PSUs. Undeniably, there is an urgent need to restructure them to improve their
performance. But privatization is not only the way to put the PSEs on the right
track because the private sector is not rosy and glory.
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BIBLIOGRAPHY
1. https://www.assignmentpoint.com/business/management/assignment-on-
privatization.html
2. https://www.economicsdiscussion.net/essays/privatization/essay-on-
privatization-meaning-reasons-and-effects/16426
3. https://www.scribd.com/doc/27557818/Assignment-on-Privatisation
4. https://www.scribd.com/upload-
document?archive_doc=27557818&escape=false&metadata=%7B%22cont
ext%22%3A%22archive_view_restricted%22%2C%22page%22%3A%22re
ad%22%2C%22action%22%3A%22download%22%2C%22logged_in%22
%3Atrue%2C%22platform%22%3A%22web%22%7D
5. https://en.wikipedia.org/wiki/Privatization