Disinvestment/Privatisation:
For all kinds of development that a government undertakes, money comes out to be the main motive force. Now, how do they get this money? They may of course increase the taxes, or lower subsidies, both of which cannot be implemented in a major way because of round-the-year elections in our country for fear of facing the public's ire. The government has some Public Sector undertakings, whose revenues and dividends can partly fuel the country's development needs. But the performance of PSUs is often found to be less than satisfactory than their private sector counterparts. So, as we enter a more globalised world with our age-old static institutions, who have never been competitive due to support from government, we end up loosing precious business to the more efficient private players of other countries. For example, in the private sector, bankruptcy is taken seriously. In contrast, public sector managers tend to be relatively relaxed about the prospect. Drastic adjustments do not take place, as the managers know that there is no real danger of extinction. The answer to these problems is Privatisation, where government gives up the majority stake to a private enterprise. This is a win-win situation for both the parties involved as it provides the government with huge funds, that may be used to build critical infrastructure ( in India's case) for accelerating growth while enhancing the performance of the formar PSU. The best example is of Maruti whose privatisation brought more than 2000 crores to the government kitty while visibly improving its performance after privatisation. Privatisation, however, cannot be implemented everywhere. There is afterall a chance of greed coming over national interest. So, the best course is Disinvestment, where the government sells some equity to private stakeholders, while retaining the majority share, to maintain its hold over the industries that are critical for the country.
To give you a better idea, while the sale of 25% stake in Maruti fetched the government 2000 crores back then, a miniscule disinvestment of 5% in NTPC (from 89.5% to 84.5%) will fetch a handsome 8100 crores, and there is scope for at least 10-15% more divestment!
Though it was claimed to be a victim of coalition politics in the UPA's previous term, there is no such compulsion now, with Left no longer a stakeholder in the government. Still, the process of disinvestment has been slow and dismal, compared to the time of NDA 10 years ago, when there was a separate disinvestment ministry for this purpose, which more than anything else shows the difference in econmic policies of the BJP and Congress.
For all kinds of development that a government undertakes, money comes out to be the main motive force. Now, how do they get this money? They may of course increase the taxes, or lower subsidies, both of which cannot be implemented in a major way because of round-the-year elections in our country for fear of facing the public's ire. The government has some Public Sector undertakings, whose revenues and dividends can partly fuel the country's development needs. But the performance of PSUs is often found to be less than satisfactory than their private sector counterparts. So, as we enter a more globalised world with our age-old static institutions, who have never been competitive due to support from government, we end up loosing precious business to the more efficient private players of other countries. For example, in the private sector, bankruptcy is taken seriously. In contrast, public sector managers tend to be relatively relaxed about the prospect. Drastic adjustments do not take place, as the managers know that there is no real danger of extinction. The answer to these problems is Privatisation, where government gives up the majority stake to a private enterprise. This is a win-win situation for both the parties involved as it provides the government with huge funds, that may be used to build critical infrastructure ( in India's case) for accelerating growth while enhancing the performance of the formar PSU. The best example is of Maruti whose privatisation brought more than 2000 crores to the government kitty while visibly improving its performance after privatisation. Privatisation, however, cannot be implemented everywhere. There is afterall a chance of greed coming over national interest. So, the best course is Disinvestment, where the government sells some equity to private stakeholders, while retaining the majority share, to maintain its hold over the industries that are critical for the country.
To give you a better idea, while the sale of 25% stake in Maruti fetched the government 2000 crores back then, a miniscule disinvestment of 5% in NTPC (from 89.5% to 84.5%) will fetch a handsome 8100 crores, and there is scope for at least 10-15% more divestment!
Though it was claimed to be a victim of coalition politics in the UPA's previous term, there is no such compulsion now, with Left no longer a stakeholder in the government. Still, the process of disinvestment has been slow and dismal, compared to the time of NDA 10 years ago, when there was a separate disinvestment ministry for this purpose, which more than anything else shows the difference in econmic policies of the BJP and Congress.
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