Economics · Ch 8 — Economic Reforms
Privatisation
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Privatisation
Privatisation refers to the transfer of ownership, management or control of a public-sector enterprise (PSU) — wholly or partly — to the private sector. The underlying idea is that competition and profit-driven private management tend to use resources more efficiently than a monopoly government enterprise insulated from market pressure.
Forms privatisation took in India
- Disinvestment — the government sold a part of its shareholding in PSUs (like ONGC, IOC, and many others) to private investors and the public through the stock market, while often retaining majority control.
- Strategic sale — the government sold a substantial stake, along with management control, to a private buyer (for example, the sale of some hotel and industrial units).
- Reduction in the number of industries reserved for the public sector — the list of industries where only the government could operate was cut from 17 (in 1956) to a very small number, opening most sectors to private players.
- Autonomy for surviving PSUs — profitable PSUs were given greater financial and managerial freedom under the Navratna and Miniratna schemes, so they could compete more like private firms without being fully privatised.