Question

Discuss the theoretical issues involved in the privatisation debate. Further. comment on this issue on the basis of theoretical points and empirical evidence from India and abroad. ANSWER IN ABOUT 2000 WORDS.

Answer 1

Privatisation is a process of involving the private sector organisation on the ownership or operation of a state owned enterprise.it implies a gradual withdrawal of government ownership and management from the government organisations or public sector enterprise and this particular prosecc happened in two ways they are categoried below

I. Outright sale of the government enterprise to the private entrepreneurs.

II. Withdrawal of the government ownership and management from the mixed entreprise (the enterprise jointly owned and managed by the government and the private entrepreneurs for the betterment of the organisation )

There is an acute need for privatisation which was felt mainly becauseof poor performance of public sector units in terms revenue, production and in terms of human and natural resource utilisation . The absolute needs are categorised below.

I. The process of industrialisation started during the phase where there was a intense shortage of knowledge and skill among workers.

II. All the economies of the world started becoming capitalistic that is they started becoming profit oriented.

III. Rapid growth and development in population and demand of goods and commodities played a vital role for privatisation .

IV. It was on account of the spread of public sector units that the economy underwent a structural transformation people started shifting from agriculture to industries as the source of livelihood and there is a gradual increase in the percentage contribution of industrial sectors towards the gross domestic product of the country

V. Gradually most public sector unit turned into socual dead weight or a social liability and a mounting losses of resource and capital of public sector unit became unsustainable

VI. Leakage , pilferage , inefficiencies and corruptionhad also became a rampant cause for which public sector units considered their privatisation as the only remedy to save them self from bankruptcy.

VII. after a prolong suffering the government organisations are bound to phase out public enterprise by selling its equity to the private entrepreneurs, privatisation was to replace public ownership or government share to a large number of enterprise.

VII. Privatisation was much required for upgrading the functional freedom with a view to enhance their competitive strength.

Advantage of privatisation

I. The term privatisation implies supremacy of self interest, profit oriented of a wealth maximising movive over social interest or a socialist economy.when self interest prevails the entrepreneurs work with cent percent commitment and efficiency become the only condition of survival for the workers and high productivity is the becomes obvious reason for privatisation of public sector units.

II. Privatisation expects the private entreprise to work in a competitive environment both in domestic as well as in the international level to produce a better statistics of result in production and utilisation of resources.

III. Competition among the privatised industries induce upgradation and modernisation which are the essential conditions for growth and development on the industry.

IV. Privatisation promotes the diversification of products and the production units,unlike public sector units private entreprise invariably generate high profit which is retained and latter used for expantion and diversification of production. All the multi national companies operating around the world are example of the fact that private sector enterprise are capable of redefining the benchmark of growth and resetting the production goals within themselfs.

V. Privatisation promotes consumer sovereignty which means the real judging power lies in the hand of the consumer yhey can accept and reject the quality, brand , usability, utility of a particular product. Higer degree of consumer sovereignty means wider choice with the consumer and better quality of life.

Disadvantage of privatisation -

I. The socialist partern of the economy which promites social intrest as its top priority and it is highly focused towards it is left to survive only as a theoretical possibilities it losses its practical relivance once the public sector units are sold off to the private entrepreneurs for avoiding the loss of assets and productivity.

II. Privatisation promotes and encourage the free play of market forces but in this process goods and commodities are produced only for those who have the means to buy them or who have the purchasing power to afford them. When the price of the product rises (which is a obvious tendency of happening in a system driven by the free market forces or a market where there are many producers for a same variety of products ) weaker sections of the society or the people who live below the poverty line suffer from deprivation.

Example-

NAVRATNAS in India are nine such profit making public sector unit companies by whom Indian economy was driven for decades. However with passage of time navratna status were no longer was confined to these nine public sector units,it was accorded with other industries as well . The Navratnas have often been quoted by the government as the epicentre of growth in the Indian economy and it is not denied the fact that these enterprises brought about an exemplary shift in the concept of industrialisation in the economy .these entreprise served not only as a significant source of employment but also as an infrastructural base that induced private investment diverse area of industrial growth.

In the wake of privatisation the government had initially thought of disinvestment of navratnas which is the policy to promote privatisation as well but owing to a stiff political resistance it now decided to develop the navratnas as a global players in their respective areas of industrialisation.