Privatisation

What is privatisation

It means shedding up of ownership of Govt owned enterprises

In easy language, it means selling of Govt owned PSE (Public Sector Enterprises)

It is done in 2 ways:

1 Withdrawal of Ownership and management of PSE

2 Total Sale of PSE

What is Disinvestment?

It means Sale of Part of Equity of PSE to public by government

Example

Suppose, Govt owns 100% shares of State bank of India

It sells 10% shares to public in stock market

Now, Govt owns Partial Equity to Public

What was the reason for Privatisation/Disinvestment?

1 Improve Financial Discipline

(Since funds of public will be involved, PSE have to use it judiciously)

2 Facilitate Modernisation of PSE

Managerial Capability of Private Sector can be used to improve performance of PSU

3 Strong Impetus to FDI (Promote FDI in India)

FDI is Foreign Direct Investment

When govt sells its shares, it will be purchased by foreign investors

Hence, Foreign funds will enter India

4 Help in Meeting Budgetary Deficit

Govt sometimes Sell loss making PSU to generate funds

Govt used these funds to meet Budgetary Deficit

(Excess of Expenditure over Income in budget is called Budgetary Deficit)

Why Government Declared some PSE as Navratnas?

The word 'Navratna' means 9 Jewels

Word is derived from Court of King Vikramaditya who was an eminent persons in art, literature and knowledge

Govt declared some PSE as Maharatna,Navratna and Miniratna

Reason

These companies were given greater autonomy (independence) in management and operations

These companies were given freedom to take decisions independently and increase their profits

This lead to better performance

NCERT Questions

Question 9

Those public sector undertakings which are making profits should be privatised.

Do you agree with this view?

Why?

Question 12

Do you think the navaratna policy of the government helps in improving the performance of public sector

undertakings in India?

How?

MCQ Other Books

Question 1

In the following questions, select the correct answers:

_____ refers to the disposal of equity of public sector units in the market.

1. Liberalisation
2. Globalisation
3. Disinvestment
4. Privatisation

Question 2

____ refers to the transfer of ownership, management and control of PSUs to the entrepreneurs in the private

sector

1. Liberalisation
2. Privatisation
3. Globalisation
4. None of these

Question 3

Which of the following statements is not true about problems in public sector in India?

1. Lack of technical efficiency
2. Discriminating policy of organization
3. Lack of incentives
4. Adequate control of parliament

Question 4

Assertion (A): Every year government fixes a target for disinvestment of Public Sector Enterprises (PSEs).

Reason (R): Disinvestment is an excellent tool for discarding the loss incurring Public Sector Enterprises (PSEs).

1. Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of the Assertion (A).
2. Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of the Assertion (A).
3. Assertion (A) is true, but Reason (R) is false.
4. Assertion (A) is false, but Reason (R) is true.