Privatization Of Public Sector || Methods Of Privatization || Parts Of Privatization || Main Aim Of Privatization || Why is Privatization Important||

 

Privatization Of Public Sector:

  •  Meaning: It means the transfer of ownership, management, and control of the public sector                            enterprises to the private sector. 
           Privatization of the public sector companies by selling off parts of the equity of PSEs to the    public is known as disinvestment.


  • Ways of Privatization:

          Govt. companies are transformed into private companies in two ways:

  1. Transfer of Ownership: 
           (i) By withdrawal of the Govt. from ownership and management of public sector companies.
          (ii) By the outright sale of public sector companies.
 
     2. Disinvestment:
         
          (i) Privatization of the public sector undertaking by selling off parts of the equity of PSUs to the   private sector is known as Disinvestment.
         (ii) The purpose of the sale is mainly to improve financial discipline and facilitate modernization.

  • Six Methods of Privatization:

          1. Public Sales of Shares.
          2. Public Auction.
          3. Public Tender.
          4. Direct Negotiations.
          5. Transfer of control of enterprises that were controlled by the state or by municipalities.
          6. Lease with a Right to Purchase.

  • Pros of Privatization:

          1. Improved performance and customer experience.
          2. Politics does not interfere.
          3. Short-term outlook.
          4. Encouragement For Shareholders to invest because of returns.
          5. Increased Competitions.
          6. Govt. will increase the revenue from the sales.

  • Main Aim Of Privatization:

         (i) Providing a strong momentum to the inflow of FDI.
        (ii) Improving the efficiency of Public Sector Undertaking (PSUs).

  • Why is Privatization Important:

          For any economy, Privatization is important because it creates jobs and builds a healthy       competitions in the market.
          Privatization works for maximizing profit by improving the standards of customer services and    goods.

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