What are the main aspects of privatization in India?

Privatization is closely associated with the phenomena of globalization and liberalization. Privatization is the transfer of control of ownership of economic resources from the public sector to the private sector. It means a decline in the role of the public sector as there is a shift in the property rights from the state to private ownership.

The public sector had been experiencing various problems, since planning, such as low efficiency and profitability, mounting losses, excessive political interference, lack of autonomy, labour problems and delays in completion of projects. Hence to remedy this situation with Introduction of New Industrial Policy (NIP), 1991 privatization was also initiated into the Indian economy.

Another term for privatization is Disinvestment. The objectives of disinvestment were to raise resources through sale of PSUs to be directed towards social welfare expenditures, raising efficiency of PSUs through increased competition, increasing consumer satisfaction with better quality goods and services, upgrading technology and most importantly removing political interference.

The main aspects of privatization in India are as follows;

1. Autonomy to Public Sector

Greater autonomy was granted to nine PSUs referred to as ‘navaratnas’ ( ONGC, HPCL, BPCL, VSNL, BHEL) to take their own decisions.

2. Dereservation of Public Sector

The number of industries reserved for the public sector were reduced in a phased manner from 17 to 8 and then to only 3 including Railways, Atomic energy, Specified minerals. This has opened more areas of investment for the private sector and increased competition for the public sector forcing greater accountability and efficiency.

3. Disinvestment Policies

Till 1999-2000 disinvestment was done basically through sale of minority shares but since then the government has undertaken strategic sale of it’s equity to the private sector handing over complete management control such as in the case of VSNL , BALCO .etc.

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