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Day 31 – Q 1.What are the various forms of privatisation? Which one of them has been the most prominent one in India? Discuss.

1. What are the various forms of privatisation? Which one of them has been the most prominent one in India? Discuss.

निजीकरण के विभिन्न रूप क्या हैं? उनमें से कौन सा भारत में सबसे प्रमुख रहा है? चर्चा  करें।


Privatization generally refers to inducing private sector participation in the management and ownership of Public Sector Enterprises. In India Privatisation began with the 1991 LPG Reforms.


Privatization in India

Privatization in the country was launched mainly to enhance the efficiency of the public sector enterprises as well as to concentrate the operation of the public sector in priority areas.

Types of Privatisation:

  • Privatization is often referred as denationalization and destatization i.e., transfer of the state ownership of the assets to the private sector to the tune of 100 per cent. India never ventured into such type of privatization.
  • Another type of privatization is disinvestment. This process includes selling of the shares of the state-owned enterprises to the private sector. Disinvestment is de-nationalization of less than 100 per cent ownership transfer from the state to the private sector. If the sale of shares of the state-owned assets has been to the tune of 51 per cent, the ownership is really transferred to the private sector even then it is termed as privatization.
  • Another way, in which the term privatization has been used around the world, is very wide. Basically, all the economic policies which directly or indirectly seem to promote the expansion of the private sector or the market (economy) have been termed by experts and the governments as the process of privatization. We may cite few examples from India—delicensing and de-reservation of the industries, even cuts in the subsidies, permission to foreign investment, etc.

India has been following privatisation strategies like selling of loss making units to the private sector, inviting private participation in PSEs, and strategic sale etc.,

Most Prominent type of Privatisation in India – Disinvestment.

The New Industrial Policy of 1991, introduced disinvestment policy along with other economic reforms.

 Journey of Disinvestment as a Process:

  • It helped to raise finances for the government which are spent on social sector priorities and reduces the debt burden of the government. Eg. Against the target of Rs. 80000 crores stipulated in the Budget 2018-19, the government has earned over Rs.85000 crores from disinvestment in 2018-19.
  • It exposed the PSUs to market discipline forcing them to become more efficient and survive on their own financial and economic strength.
  • It reduced the burden on the government by limiting the budgetary support which it has to provide to PSUs. Until 2016, the government has raised around Rs. 1.8 lakh crores through disinvestments, beginning in 1992.
  • It can end the public sector monopoly in many sectors, introduce competition, reduce the costs and improve the quality of services offered to consumers. E.g. telecom, civil aviation.

Few fallouts

  • Government shareholding in PSUs is a public asset is being liquidated to meet the immediate needs.
  • PSUs act as a check on private enterprises and safeguard the wider public interests in the market. For example, in the absence of PSUs, private enterprises may form a cartel.
  • When the government goes for a strategic sale/privatization, there are chances of a PSU being sold off at a lower value to a private entity which can be against the larger public interest.


In India, hence privatization is a successful strategy and unique in form in accordance with the priorities of our mixed economy and as well as by considering operational aspects of the PSUs. 

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