<–2/”>a >Public sector has played an important role in achieving industrial self reliance. Iron and steel, railway equipment, petroleum, coal and fertilizer industries, have been developed in this sector. These industries were established in industrially backward regions. During the seventh five year plan an emphasis was laid on high technology, high value addition and knowledge based industries like electronics, advanced machine tools and telecommunications.
After independence, systematic industrial planning under different Five Year Plans helped in establishing a large number of heavy and medium industries. The main thrust of the Industrial Policy was to remove regional imbalances and to introduce diversification of industries. Indigenous capabilities were developed to achieve self sufficiency. It is due to these efforts that India has been able to develop in the field of Industry.
The Industrial Policy Resolution 1956 classified industries into three categories with respect to the role played by the State –
- The first category (Schedule A) included industries whose future development would be the exclusive responsibility of the State
- The second (Schedule B) category included Enterprises whose initiatives of development would principally be driven by the State but private participation would also be allowed to supplement the efforts of the State
- And, the third category included the remaining industries, which were left to the private sector
After Reforms of 1991, the main focus was:
i) reduction in the number of industries reserved for public sector from 17 to 8 (reduced still further to 3) and the introduction of selective competition in the reserved area;
ii) the Disinvestment of Shares of a select set of public enterprises in order to raise Resources and to encourage wider
iii) participation of general public and workers in the ownership of public sector enterprises;
iv) the policy towards sick public enterprises to be the same as that for the private sector; and
v) an improvement of performance through MoU (memorandum of understanding) system by which managements are to be granted greater autonomy but held accountable for specified results.
Privatization transfer the ownership of public enterprises to private capital, opening of more industrial areas to private capital and enterprise. The main aim of privatisation is to make use of privately owned resources for collective welfare of the people.
Privatization in generic terms refers to the process of transfer of ownership, can be of both permanent or long term lease in nature, of a once upon a time state-owned or public owned property to individuals or groups that intend to utilize it for private benefits and run the entity with the aim of profit maximization.
ADVANTAGES OF PRIVATIZATION
Privatization indeed is beneficial for the Growth and sustainability of the state-owned enterprises.
• State owned enterprises usually are outdone by the private enterprises competitively. When compared the latter show better results in terms of revenues and efficiency and productivity. Hence, privatization can provide the necessary impetus to the underperforming PSUs .
• Privatization brings about radical structural changes providing momentum in the competitive sectors .
• Privatization leads to adoption of the global best practices along with management and motivation of the best human talent to foster sustainable competitive advantage and improvised management of resources.
• Privatization has a positive impact on the financial Health of the sector which was previously state dominated by way of reducing the deficits and debts .
• The net transfer to the State owned Enterprises is lowered through privatization .
• Helps in escalating the performance benchmarks of the industry in general .
• Can initially have an undesirable impact on the employees but gradually in the long term, shall prove beneficial for the growth and prosperity of the employees .
• Privatized enterprises provide better and prompt Services to the customers and help in improving the overall Infrastructure-2/”>INFRASTRUCTURE of the country.
DISADVANTAGES OF PRIVATIZATION
Privatization in spite of the numerous benefits it provides to the state owned enterprises, there is the other side to it as well. Here are the prominent disadvantages of privatization:
• Private sector focuses more on profit maximization and less on social objectives unlike public sector that initiates socially viable adjustments in case of emergencies and criticalities .
• There is lack of transparency in private sector and stakeholders do not get the complete information about the functionality of the enterprise .
• Privatization has provided the unnecessary support to the Corruption and illegitimate ways of accomplishments of licenses and business deals
ADVANTAGES AND DISADVANTAGES OF PRIVATISATION IN INDIA
• Privatization loses the mission with which the enterprise was established and profit maximization agenda encourages malpractices like production of lower quality products, elevating the hidden indirect costs, price escalation etc..
• Privatization results in high employee turnover and a lot of Investment is required to train the lesser-qualified staff and even making the existing manpower of PSU abreast with the latest business practices .
• There can be a conflict of interest amongst stakeholders and the management of the buyer private company and initial resistance to change can hamper the performance of the enterprise .
• Privatization escalates price Inflation in general as privatized enterprises do not enjoy government subsidies after the deal and the burden of this inflation effects common man.
Disinvestment of a Percentage of shares owned by the Government in public undertakings emerged as a policy option in the wake of economic liberalisation and structural reforms launched in 1991. Initially, it was not conceived as privatisation of existing undertakings but as limited sales of Equity with the objective of raising some resources to reduce budgetary gaps and providing market discipline to the performance of public enterprises in general.,
The role of public sector enterprises in India’s industrialization in the post-reforms period has been a subject of much debate. Some argue that they have played a vital role in the country’s Economic Development, while others believe that they have been a drain on the economy.
There is no doubt that public sector enterprises have played a significant role in India’s industrialization. They have been involved in a wide range of activities, including manufacturing, mining, power generation, and telecommunications. They have also been involved in the development of infrastructure, such as roads, railways, and Airports.
However, there is also no doubt that public sector enterprises have been a drain on the economy. They have been inefficient and have often run at a loss. They have also been accused of corruption and Nepotism.
In the post-reforms period, the government has embarked on a program of disinvestment and privatization of public sector enterprises. This has been done in an effort to improve efficiency and reduce the fiscal burden on the government.
The disinvestment and privatization of public sector enterprises has been a controversial issue. Some argue that it has been a success, while others believe that it has been a failure.
It is too early to say whether the disinvestment and privatization of public sector enterprises has been a success or a failure. However, it is clear that they have had a significant impact on India’s economy.
The history of public sector enterprises in India
Public sector enterprises in India have a long history. The first public sector enterprise was set up in 1951, and by the end of the 1960s, there were over 500 public sector enterprises in India.
The growth of public sector enterprises in India was driven by a number of factors, including the need to develop infrastructure, the need to promote industrialization, and the need to protect domestic industries from foreign competition.
The role of public sector enterprises in India’s economic development
Public sector enterprises have played a significant role in India’s economic development. They have been involved in a wide range of activities, including manufacturing, mining, power generation, and telecommunications. They have also been involved in the development of infrastructure, such as roads, railways, and airports.
Public sector enterprises have also played a role in promoting industrialization in India. They have provided EMPLOYMENT to millions of people and have helped to develop new technologies.
The efficiency of public sector enterprises
Public sector enterprises in India have been accused of being inefficient. They have been known to run at a loss and have been accused of corruption and nepotism.
The government has taken steps to improve the efficiency of public sector enterprises. It has introduced performance-based incentives and has made it easier for public sector enterprises to fire employees.
The corruption and nepotism in public sector enterprises
Public sector enterprises in India have been accused of corruption and nepotism. There have been a number of scandals involving public sector enterprises, and many people believe that they are a drain on the economy.
The government has taken steps to address the problem of corruption in public sector enterprises. It has introduced new laws and regulations and has set up anti-corruption agencies.
The disinvestment and privatization of public sector enterprises
In the post-reforms period, the government has embarked on a program of disinvestment and privatization of public sector enterprises. This has been done in an effort to improve efficiency and reduce the fiscal burden on the government.
The disinvestment and privatization of public sector enterprises has been a controversial issue. Some argue that it has been a success, while others believe that it has been a failure.
The impact of disinvestment and privatization on India’s economy
It is too early to say whether the disinvestment and privatization of public sector enterprises has been a success or a failure. However, it is clear that they have had a significant impact on India’s economy.
The disinvestment and privatization of public sector enterprises have led to a number of changes in the Indian economy. They have led to an increase in private investment, they have led to an increase in competition, and they have led to an increase in efficiency.
The future of public sector enterprises in India
The future of public sector enterprises in India is uncertain. The government has said that it will continue to disinvest and privatize public sector enterprises, but it is not clear how many public sector enterprises will remain in the public sector.
It is possible that the government will eventually privatize all of the public sector enterprises in India. However, it is also possible that the government will retain some public sector enterprises in order to provide essential services or to protect national security.
Role of Public Sector enterprises in India’s industrialization in post reforms period
Public sector enterprises (PSEs) have played a significant role in India’s industrialization in the post-reforms period. They have contributed to the growth of the economy, the development of infrastructure, and the creation of employment.
PSEs have also helped to promote competition and efficiency in the economy. They have been a source of innovation and technological development.
However, PSEs have also faced some challenges in the post-reforms period. These include the need to improve efficiency, reduce losses, and attract private investment.
Despite these challenges, PSEs continue to play an important role in India’s economy. They are expected to continue to contribute to the growth of the economy and the development of infrastructure in the years to come.
Disinvestment and Privatisation of Pubiic Enterprises
Disinvestment is the process of selling a part or whole of the government’s stake in a public sector enterprise (PSE). Privatisation is the process of transferring ownership of a PSE from the government to the private sector.
Disinvestment and privatisation are often used as tools to improve the efficiency and profitability of PSEs. They can also be used to raise revenue for the government.
However, disinvestment and privatisation can also have negative consequences. They can lead to job losses and a decline in the quality of services provided by PSEs.
The decision of whether or not to disinvest or privatise a PSE is a complex one. It is important to weigh the potential benefits and costs of these measures before making a decision.
Frequently Asked Questions
- What is the role of public sector enterprises in India’s industrialization?
Public sector enterprises (PSEs) have played a significant role in India’s industrialization. They have contributed to the growth of the economy, the development of infrastructure, and the creation of employment.
- What are the challenges faced by public sector enterprises in India?
PSEs have faced some challenges in the post-reforms period. These include the need to improve efficiency, reduce losses, and attract private investment.
- What is disinvestment?
Disinvestment is the process of selling a part or whole of the government’s stake in a public sector enterprise (PSE).
- What is privatisation?
Privatisation is the process of transferring ownership of a PSE from the government to the private sector.
- What are the benefits of disinvestment and privatisation?
Disinvestment and privatisation can improve the efficiency and profitability of PSEs. They can also raise revenue for the government.
- What are the costs of disinvestment and privatisation?
Disinvestment and privatisation can lead to job losses and a decline in the quality of services provided by PSEs.
- What is the decision-making process for disinvestment and privatisation?
The decision of whether or not to disinvest or privatise a PSE is a complex one. It is important to weigh the potential benefits and costs of these measures before making a decision.
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Which of the following is not a public sector enterprise in India?
(A) Air India
(B) Bharat Heavy Electricals Limited (BHEL)
(C) Hindustan Petroleum Corporation Limited (HPCL)
(D) Tata Consultancy Services (TCS) -
The first public sector enterprise in India was set up in the year:
(A) 1947
(B) 1950
(C) 1956
(D) 1969 -
The main objective of setting up public sector enterprises in India was to:
(A) Promote economic development
(B) Increase employment
(C) Reduce inequality
(D) All of the above -
The disinvestment of public sector enterprises in India began in the year:
(A) 1991
(B) 1992
(C) 1993
(D) 1994 -
The main objective of disinvestment of public sector enterprises in India is to:
(A) Raise resources for the government
(B) Improve efficiency of public sector enterprises
(C) Reduce the role of the government in the economy
(D) All of the above -
The following are the methods of disinvestment of public sector enterprises except:
(A) Sale of shares to the public
(B) Sale of shares to strategic investors
(C) Sale of assets
(D) Closure of the enterprise -
The following are the benefits of disinvestment of public sector enterprises except:
(A) Increased efficiency of public sector enterprises
(B) Reduced government control over the economy
(C) Increased competition in the economy
(D) Increased revenue for the government -
The following are the challenges of disinvestment of public sector enterprises except:
(A) Employee resistance
(B) Lack of transparency
(C) Corruption
(D) Political interference -
The following are the criticisms of disinvestment of public sector enterprises except:
(A) It leads to loss of jobs
(B) It leads to concentration of economic power in the hands of a few
(C) It leads to foreign domination of the economy
(D) It leads to increase in prices of goods and services -
The following are the arguments in favor of disinvestment of public sector enterprises except:
(A) It leads to increased efficiency of public sector enterprises
(B) It reduces government control over the economy
(C) It increases competition in the economy
(D) It leads to increased revenue for the government