Privatization of public sector 2020

An economy is a social system of production, distribution and consumption. It is a dynamic reflection of economics in a particular country or region. The earliest mention of this word is found in the book Arthashastra written by Kautilya. Economy is made up of two words. Here meaning means – currency means money and order – an established system. There are many forms of functioning in the economy and on the basis of these forms, the planning and planning of the economy is replaced. There are three main types of economy – socialist, capitalist and mixed. In a socialist economy, there is significant interference in the economy of the state, in addition to this, the state’s interference in the mixed economy is limited, and in the capitalist economy, the state interferes with the economy. The nature of planning is determined by the nature of the economy. The Indian economy is predominantly of mixed nature but the Indian economy has been privatized since 1991 due to limited success of Hindu growth rate and globalization. At present, privatization of public sector undertakings is a matter of discussion due to the tendency of losses.

Current state of public sector:

Presently, some large public sector undertakings like Bharat Sanchar Nigam Limited, Mahanagar Telephone Nigam Limited and Air India are witnessing the trend of losses, the losses of these enterprises are more than their revenue receipts. Economists have a term for such enterprises – Value Subtracting Enterprises. Despite their reorganization and even the use of money and other resources, positive results are not being generated. The government may have to pay the buyer like in the case of Delhi discoms privatization. World Bank advisors had said on the privatization of Delhi discoms: “Privatization should be resorted to to improve physical performance rather than dealing with losses.”

Purpose of privatization:

It is generally believed that “business is not the business of the state”. That is why there should be very limited government intervention in business / economy. A capitalist economy operates through market factors. After globalization, this type of retention is developing more rapidly.

Apart from this, some other major objectives of privatization are-

  • At present it has become necessary that the government focus more on the efficiency of governance than on the control, management and operation of “non-strategic enterprises” themselves.
  • Large amount of public resources should be invested in non-critical public sector enterprises in priority areas of society. Such as public health, family welfare, primary education and social and necessary infrastructure.
  • The burden of public debt should be reduced by preventing further outflows of scarce public resources to be made to unviable and non-critical public sector enterprises.
  • Transfer of commercial risk to the public sector which is taxed by taxpayers, to such a private sector in respect of which the private sector is eager and able to come forward. In fact, the money invested in public sector enterprises is from the general public. Therefore, it is important to consider the amount of excessive finance being levied in the corporate sector.
  • In fact, public sector banks are being asked to sell their stake in the ownership of banks due to rising non-performing asset (NPA) volume, stressed assets, increased corruption and better management and operational efficiency problems. .

Privatization means:

public sector

Privatization is a much talked about topic in the current democracy. The meaning of privatization is expressed in many ways. Privatization in a narrow sense refers to the entry of private ownership in industries operating under public ownership. In addition to private ownership in broad terms (ie without the change of ownership) is imposed by the entry of private management and control in public industries, after studying both the above mentioned ideologies of privatization, it seems more appropriate that privatization should be extended. Should be seen as well.

It is also possible that the transfer of property rights from the public sector to the private sector takes place without sale. Technically, it can be called Deregulation. Which means that the areas which were till now reserved as public sector, will now be allowed to enter the private sector. In other clear words, privatization is a process under which a new industrial culture develops, ie moving from the public sector to the private sector.

In the context of economic reforms, privatization means opening more and more industries to the private sector out of industries safe for the public sector. Under this, the entire public sector enterprises or part of them are sold to the private sector.

Benefits of Privatization:


In the context of the concept that “business is not the business of the state”, privatization offers great potential for performance.

  • As a result of market discipline in privatized companies, they will be forced to become more efficient and focus more on the performance of their own financial and economic workforce. They will be able to more actively combat the factors affecting the market and fulfill their commercial needs in a more commercial manner. Privatization will also limit government control of public sector enterprises and this will allow privatized companies to achieve the required corporate governance.
  • As a result of privatization, power and management will be decentralized by offering shares of privatized companies to small investors and employees.
  • Privatization will have a beneficial effect on the capital market. Investors will find simple exit options, help set up more rigorous rules for valuation and pricing, and help privatized companies raise funds for their projects or their expansion.
  • The opening up of the earlier public areas to the above private investors will increase economic activity and will have a beneficial effect on the economy, employment and tax revenue in the medium to long term overall.
  • Consumers will get relief due to more options and cheaper and better quality products and services as the public sector monopoly ends in many sectors like telecom and petroleum.

Issues related to personalization:

  • There are several benefits of public sector undertakings, the fact that the public sector has more economic, social benefits than the private sector and privatization in a democratic country like India has many difficulties. The Preamble of the Indian Constitution envisages social, economic and political justice, in principle these views differ from the process of privatization.
  • The biggest difficulty of the process of privatization is the opposition from the workers through the union. They are afraid of large-scale management and changes in work-culture.
  • After privatization, the pure assets of companies will not be used for public works and public.
  • Corporations can be encouraged to benefit big industries through privatization, which will increase the possibility of concentration of funds.
  • There may be a lack of healthy competition in the market due to wealth concentration and business monopoly.
  • Efficiency is not the only solution to the problems of the industrial sector. For that, a proper change in the proper economic environment and work culture is necessary. Privatization in India cannot be considered the only solution to all the current problems of the economy.
  • At present, it is very challenging to limit their ill effects on the Indian economy in the absence of government control due to the ongoing trade war and protectionist policies at the global level. After privatization, there will be rapid internationalization of companies and these side effects will also affect the Indian economy.


Presently, the nature of a dynamic economy due to the effects of globalization and performance in the economy, corporate governance as well as problems such as NPAs have encouraged the government to encourage privatization. Therefore, it is imperative for the government to focus on social and public interest along with this step so that a positive step can be taken to achieve the objectives of the Preamble of the Indian Constitution.

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