Privatisation

  • It refers to the transfer of the ownership or management of a government owned enterprise to the private players. Privatisation of the public sector enterprises by selling off part of the equity of PSEs to the public is known as disinvestment. The purpose of the sale, according to the government, was mainly to improve financial discipline and facilitate modernisation. It was also because of the fact that private capital and managerial capabilities could be effectively utilised to improve the performance of the PSUs.
  • The government has also made attempts to improve the efficiency of PSUs by giving them autonomy in taking managerial decisions. For instance, some PSUs have been granted special status as maharatnas, navratnas and miniratnas. They were given greater managerial and operational autonomy, in taking various decisions to run the company efficiently and thus increase their profits. Greater operational, financial and managerial autonomy has also been granted to profit-making enterprises referred to as miniratnas. The Central Public Sector Enterprises are designated with different status. A few examples of public enterprises with their status are as follows: (i) Maharatnas – (a) Indian Oil Corporation Limited, and (b) Steel Authority of India Limited, (ii) Navratnas – (a) Hindustan Aeronautics Limited, (b) Mahanagar Telephone Nigam Limited; and (iii) Miniratnas – (a) Bharat Sanchar Nigam Limited; (b) Airport Authority of India and (c) Indian Railway Catering and Tourism Corporation Limited.
  • The government has adopted disinvestment, strategic sale of minority shares to private partners and selling of loss making units to the private sector.  Some of the chronically loss making units were either sold –off, or closed after all workers got their legitimate dues and compensation. Selling of loss making units and strategic sale imply full privatization as the company’s ownership is transferred to a private entity. But the main form of inviting private participation was disinvestment which results in transfer of minority shareholding to the general public, at the same time the government maintaining 51% share.
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