Presentation on Privatization

ABROO HUSSAIN BHAT

138-MBA-09
 What is Privatization ?
Privatization may be defined as a process of shifting of control of various PSU’s to Private sector in order to improve in the performance.
History :-
Disinvestment started in 1980’s.

The word privatization was coined by

Peter. F. Ducker .

Margared Thatcher gave it practical shape

to privatization.
Objectives
To improve the performance of PSUs.

Distributing ownership more widely.

 Revenue generation.

Reducing the administrative burden.

 PRIVATISATION ROUTES
 Sale to outsiders.

 Management – Employee Buyout.

 Equal – access Voucher Privatisation.

 Spontaneous Privatization.
 Disinvestment commission
• Term disinvestment refers to withdrawal of governments share
of capital invested in public sector undertaking.

• In order to do away with recurring loss the government in its

industrial policy of 1991 started disinvestment of sick PSU’s.

• Disinvestment in PSU’s till in 1991-92 was primarily through

sale of minority shares in small lots, from 1999-2004
disinvestment changed in favour of strategic sale viz sales of a
large block of shares
Cont…
 Five member disinvestment commission was set up on 7th August
1996 for a period of three years. Main points of reference were:-
1. To draw a comprehensive overall long term disinvestment
programme with 5-10 years.
2. To determine the extent of disinvestment in each of the public
sector unit.
3. To recommend the preferred modes of disinvestment for each
of identified PSU’s.
4. To recommend a mix between primary and secondary
disinvestments taking into account govt.’s objective.
5. To supervise the overall sale process and take decision on
instrument, timing and pricing.

6. To select the financial advisors for the specified PSU.

7. To ensure the appropriate measures are taken during the

disinvestment process.

8. To monitor the process and take necessary measures.

9. To assist the government to create public awareness of the

govt.’s disinvestment policies.
 Committee on Privatisation
In order to make privatisation more effective and transparent, the
govt. formulated a committee under chairman ship of
Sri.C.Rangarajan.

 It stated that the percentage of equity to be disinvested could be up to 49%

for industries explicitly reserved for public sector.

 For industries having dominant market share the disinvestment level can be
74%.

 Holding of 51% or more was recommended only for 6 schedule industries.

Recommendations of the committee
1. Units to be disinvested need to identified.

2. There is need for government to retain majority holding in areas

like defense and atomic energy.

3. Workers interests need to be protected.

4. Disinvestment must be transparent.

5. An autonomous body needs to be set up to monitor the process

of disinvestment.
Thank you