Discuss different dimensions of privatization in brief.

Discuss different dimensions of privatization in brief.


Privatisation
Privatisation. The term is essentially an umbrella head to encompass a number of distinct and perhaps alternative means to enhance the role of private sector. Analytically speaking there are basically three dominant ways of changing this relationship. They are:

i) Denationalisation: This involves changing the ownership of public sector assets to private sector. This may be partial or full so that some activities of the former enterprise may be hived off or some or even the whole of the company’s equity may be sold;
ii) Liberalization of deregulation: This is essentially opening up of area which were hitherto reserved exclusively for the public sector or in other words the introduction of competition into statutory monopolies; and
iii) Contracting out; This involves franchising to private firms the production of goods and services which are under the financial control of the government.

In practice, more often than not much of the discussion on privatization has come to be narrowly equated with the sale of industrial assets owned by the government to the private sector.

Privatisation is thought of as a means of resolving the difficulties of relations between government and nationalized industries; and

In also reduces the power of public sector unions, leading to increased efficiency in the use of labour and less pressure towards wage inflation.

The concern for improving public enterprise performance I the country has been increasing especially in the 180s. This concern had its underpinnings in the increased role placed on the public sector to generate adequate resources for the country’s five years plans. Secondly, in has been the ratio of net savings to investment in these enterprises as shown in Table 16.8.



The government has bee seized with the programmes to improve the performance of public sector enterprises. Singing of Memorandum of Understanding (MOU), formation of holding companies are instances in this direction. But instances of Privatisation through sale of industrial assets have been very rare in the Indian case. There is just one instance, namely the sale of one public enterprise under the ownership of Andhra Pradesh State (Allwyn Nissan) to the private sector (Mahindra & Mahindra). However there are several instances of liberalisation and deregulation. Opening up of areas which were hitherto the exclusive monopoly of the state, viz., the manufacture of certain kinds of telecommunications equipment, the private air taxi services, are pertinent examples

There is of course no formal policy towards privatisation in the country. This is primarily so because it is not politically palatable and secondly because the private enterprise in the country depends to a large extent on financial resources from the public sector financial institutions. Successive governments have shield from clearly articulating on this subject.