A Presentation on

Privatization

-ByB.Joshpin

Bala

“The transfer of public assets, operations or activities to private enterprise”.

Privatization was introduced during the early eighties by Rajiv Gandhi

The government of PV Narsimha Rao gave the actual speed by introducing the new industrial policy

Privatization is the process of transferring ownership of a business, enterprise, agency, public service or public property from the public sector to the private sector.

The business that operates for a profit or non-profit organization.

Privatization

Why Privatization????

• To reduce government involvement in commercially viable activities • Increase efficiency in the delivery of

programs and services • Provides competition in market place

which transfers the lower price and greater choice for the consumers.

Variations in privatization

Private sector choice for the production of a services.

Entire responsibility transferred from public to private

Public sector choice financing with private sector operations.

joint activity of public & private

Deregulation of private firms.Govt. reduces or eliminates the regulatory imposed on private.

Methods of privatization

Share issue privatization selling shares on the stock market.

Asset sale privatization selling entire organization to a strategic

investor by auction.

Voucher privatization distributing ownership to all for free or at

lower cost.

Examples of privatization

Toll roads, bridges and airport:

A significant developments in public private partnerships is the lease of toll roads, bridges, and tunnels by state and local governments to private contractors.

These kinds of deals have previously occurred in Europe and Australia

Government could not do in 50 add years, privatization did in just 4-5 years.

The result is we have a great highways and airports.

Six industries which are not reserved for private sector

Arms and ammunition

Indian railways

Atomic energy

Chemical fertilizer

CigarettesHazardous Chemicals

Advantages of privatization

Improved efficiency: Private company have a profit incentives

to cut costs and be more efficient. Example:British airwaysLack of political Interference: Government companies can be motivated by

political pressures rather than sound economic and business sense.

Example : A state enterprise may employ surplus workers which is inefficient.

Short term view: Government may be unwilling to

invest in infrastructure improvements which will benefit the firm in the long term because they are more concerned about projects that give a benefit before the election.

Increased competition: Increase in competition that can

be the greatest spur to improvements in efficiency.

Disadvantages of privatizationThe private companies don’t like

to have their branches in rural cities.

Their services remain confined to cities where sufficient clients are available.

Problem of unemployment

Aims at high profits which adversely effect the interest of the

community

Market share of privatization is increasing year by year

•It is commonly believed that the private sector can offer greater performance and economic efficiency than the public sector, but in the case of public water utilities this has not been proven.•According to various studies, publicly owned utilities have lower costs than privately owned utilities. •Poor people may not afford the cost of water due to privatization.

Stop water privatization!!