Considering the situation of economic contraction, it can be a wise decision to revisit the privatisation of public enterprises. Do you agree with this view? Analyse (200 Words)
Refer - The Hindu
Enrich the answer from other sources, if the question demands.
IAS Parliament 3 years
KEY POINTS
· Privatisation of the public sector, including banks, has been part of the wish list of economic reformers since 1991. This was at the core of the ‘Washington Consensus’
· Unemployment has risen, incomes for growing numbers are falling, bank non-performing assets (NPAs) may be ballooning, and the fiscal deficit is rising.
Sick enterprises
· With its political strength, the Government should be able to close sick enterprises in a time-bound manner with a generous handshake for labour.
· Where private management through privatisation or induction of a strategic partner is the best way to restore value of these enterprises.
· Air India and the India Tourism Development Corporation (ITDC) hotels are good examples.
· With profitable public enterprises, the Government can continue to reduce its shareholding by offloading shares and even reducing its stake to less than 51% while remaining the promoter and being in control.
Implications
· The number of Indian private firms which can buy out public sector firms are very few.
· Successful large corporates need to be encouraged to invest and grow both in brownfield and greenfield modes in the domestic as well as international markets.
· This would be better for India entering a higher growth trajectory with an increase in investment rates which have been falling.
· With privatisation, this would end and unnecessarily generate social unrest.
Abdul hakkim 3 years
Please review mam /sir
IAS Parliament 3 years
Try to include some specific examples and avoid writing general points. Keep Writing.
ANIL KUMAR RAM 3 years
Please review
IAS Parliament 3 years
No need to define about privatization and include about managerial efficiency in privatization. Keep Writing.
Karthik ramakrishnan 3 years
Privatization of enterprises is necessary considering the present economic situation, however, Government of India should be wary of outright privatization as it would result in government's loss of control from certain critical enterprises. The Government of India should classify enterprises based on their performance as given below:
| Categorization of Enterprises | ||
| Category 1 | Category 2 | Category 3 |
| Dismal performance persists | Dismal performance persists. But the performance is better than Category 1 enterprises. | Good performance |
| Obsolete technology still in use. | Obsolete technology still in use. Relatively better technology from Category 1 enterprises is used. | Technology up to date. |
| Poor quality of human resources. | Poor quality of human resources in comparison with Category 3 enterprises but better than Category 1 enterprises. | Good quality of human resources. |
| Turnaround impossible. | Turnaround possible, for example, Air India, India Tourism Development Corporation (ITDC) hotels | Ideology plagues this set of enterprises. Turnaround highly possible. |
| Suggestions | Suggestions | Suggestions |
| Shut down and stop operations. | Invite private investors to be partners in the operations. | Instead of ideology, pragmatism should drive these enterprises. |
| Sell off assets. Machines for scrap and land to be disposed off prudently as the land’s value would have increased by now. | Make these enterprises debt free. Once such enterprises are debt free, government may gradually loosen its control over the enterprises by giving up stakes. This will ensure that government makes significant revenue out of such proceedings. | Government should gradually divest from such enterprises. Divestment upto 51% is possible here. |
| Such enterprises to be taken away from the ministries and be brought under a company which will be tasked with liquidation of assets. |
| Managements should be given more autonomy. For example, Maruti |
| Challenges in implementing suggestions given by the author | Challenges in implementing suggestions given by the author |
|
| Challenge 1: Labor in these enterprises are represented in the constituencies. Therefore, political intervention is a roadblock here.
Solution to Challenge 1: This can be dealt with by making generous offers to the dissident labor. | Challenge 1: Require bold decisions
Solution to Challenge 1: Strong governments are the only ones which can carry out this task. |
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IAS Parliament 3 years
Try to provide an analytical answer and bring coherence in it. Keep Writing.
