To help in rapid growth and industrialization and create necessary infrastructure for economic development. 2. Promote redistribution of income & wealth 3. Create employment opportunities 4. Promote regional balance development 5. Promote import substitution save and earn foreign exchange for country. 6. Basic Infrastructure (STC, Railways, SAIL) Organization of Public Sector •Ministry ( Railway, Finance etc) •Departmental Undertaking (Defense, Post & Telegraph, Defense production unit) •Statutory Corporation( LIC, AIR India, IFC,RBI,ONGC, etc.. •Central Board (Bhakra Nangal, Hira Kund ,Nagarjun Sagar dam) •Government Companies ( Ashok Hotels, ITI, HMT Hindustan shipyard etc) Pricing Practice ?Administrative Price : Price fixed by Government ?No profit –No loss Price ( DVC, Hindustan antibiotics, Hindustan Insecticides) ? Cost Plus Price – ITI, HAL, Bharat electronic ? Competitive Price ?Follow the leader ?Subsidized Prices ?Discriminatory Prices Private Sector ? Privatization: Transfer of ownership and control of an existing public sector enterprise ? Privatization may be full or partial.
It may be selective i. e.. Some function are transformed to the private sector, which other are retained in public sector. ?Increase in competition . The Privatization movement The move towards privatization has gained momentum since 70’s. The following are usually mentioned reasons 1 The emergence of conservative government in principal industrial countries 2 The emergence of multinational entities 3 Technological changes The Privatization movement contd. 4 Emergence of local capital market and entrepreneurship 5 Dissatisfaction with performance of public sector
Reason for Indian Privatization 1. Crippling Budget deficit 2. Spectacular growth by economies of Korea, Taiwan, Malaysia in private sector 3. Galloping cost of government intervention in trade and industry & procedural difficulty 4. Collapse of USSR& communist government in eastern Europe 5. Changes in China 6. Emergence of professional management 7. IMF & World Bank extended arm to capitalism 8. Gulf crisis 9. Lack of demand in economy 10. Integration of world trade 11. Developed local capital market and Financing Institution Recent Reasons To Strengthen Competition •To improve public finance •To fund Infrastructure Growth •Accountability of share holders •To reduce unnecessary interference •More disciplined Labor force The main reason for increased efficiency gain as a result of privatization are attributed to (i)Less political interference in decision making (i)Staff remuneration is more closely linked to productivity and profitability (ii)Firm are exposed to financial market discipline as opposed to government support (iii)Firm’s cost reducing effort are higher under competitive private ownership Advantages of public sector organizations Govt . Control in sensitive areas ? More employment ? Effective decision making ? Public accountability ? Access to all ? More employee satisfaction-better life work balance ? Recognition and honor ? Job security Disadvantages of public sector organizations ?Inefficiency results due to the size of the organization ?lack of incentive for employees ?Losses must be met by the taxpayer ? Political interference ? Less customer satisfaction ? High cost of delay/red tapism Disadvantages of public sector organizations contd. ?Headless plants ?Lack Demand – supply relation ?Over/Under capacity ?Fear of Scams
Advantages of private sector organizations ?Quick decision making ?No political interference ?More customer satisfaction ?Easy access to capital market Disadvantages of private sector organizations ?Chances of mismanagement ?Inefficient decision making ?Less focus on poor people Ways of Privatization ? Disinvestment ? Contracting ? Franchising ? Permitting private sector enter into PSU reserved area ? Liquidation ? Leasing Disinvestment Long Term strategy on disinvestment 1. Strengthen profitable PSU to promote greater competitiveness to enable payment of higher dividends to the government to enhance Value 2.
Financial restructure and revive loss making PSU to invite private capital for long term turnaround. 3. Enhance government receipt by disinvestment in profitable PSUs Initially 40 out of the 245 PSUs were referred to the disinvestment committee Conclusion ? Public sector enterprises ? Private sector enterprises ? Privatization ? Need of privatization ? Obstacles of privatization ? Ways of privatization- Disinvestment ? Advantages and disadvantages Thanks to………….. Prof. Suneel Gupta Associate Professor, Ghs-IMR, Kanpur Prof. Mansur Ali Khan NSB Prof. Surjyabrat Buragohain NSB Thank you all ?SIVAPRASAD P V ? PREMKUMAR ? VIGNESH ? MANOJ