Understanding Privatization: Meaning, Objectives, and Ways
Explore the concept of privatization, its objectives such as boosting FDI and improving efficiency, and the different ways it can be implemented through ownership transfer and disinvestment. Gain insights into the key aspects of privatization and its impact on the economy.
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Presentation Transcript
Meaning of Privatization It means the transfer of ownership, management, and control of the public sector enterprises to the private sector. Privatization can suggest several things including the migration of something from the public sector to the private sector. It is also used as a metonym for deregulation when a massively regulated private firm or industry becomes less organized. Government services and operations may also be (denationalized) privatized. In these circumstances, private entities are tasked with the application of government plans or the execution of government assistance that had earlier been the vision of state-run companies. enforcement, revenue collection, and prison management. Privatization of the public sector companies by selling off parts of the equity of PSEs to the public is known as disinvestment. Some instances involve law
Objectives of Privatization Providing strong momentum for the inflow of FDI Privatization aims at providing a strong base for the inflow of FDI. The increased inflow of FDI improves the financial strength of the economy. Improving the efficiency of public sector undertakings (PSUs)The efficiency of PSUs is improved by giving them the autonomy to make decisions. Some companies were given special categories of Navratna and Miniratna.
Ways of Privatization Government companies are transformed into private companies in two ways. Transfer of ownership- Government companies can be converted into private companies in the following two ways: By the withdrawal of the government from the ownership and management of public sector companies By the outright sale of public sector companies. Disinvestment- Privatization of the public sector undertakings by selling off parts of the equity of PSUs to the private sector is known as disinvestment. The purpose of the sale is mainly to improve financial discipline and facilitate modernization.
