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Lect Topic 3.1 Privatization

This document provides an overview of privatization in India. It discusses the concepts of liberalization, privatization, and globalization that were implemented in India in the 1990s to address issues like large fiscal imbalances and low growth. Privatization involves transferring assets or services from public to private sectors. It can have advantages like improving efficiency but also disadvantages like risk of monopoly. The document outlines some successful privatization examples in India and discusses the role of the Disinvestment Commission established in 1996 to oversee the privatization process. It concludes with brief sections on the application and references related to business environment.

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Kertik Singh
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38 views

Lect Topic 3.1 Privatization

This document provides an overview of privatization in India. It discusses the concepts of liberalization, privatization, and globalization that were implemented in India in the 1990s to address issues like large fiscal imbalances and low growth. Privatization involves transferring assets or services from public to private sectors. It can have advantages like improving efficiency but also disadvantages like risk of monopoly. The document outlines some successful privatization examples in India and discusses the role of the Disinvestment Commission established in 1996 to oversee the privatization process. It concludes with brief sections on the application and references related to business environment.

Uploaded by

Kertik Singh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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INSTITUTE: USB

DEPARTMENT: BBA
Bachelor of Business Administration
Business Environment 20BAT- 158
By-Dr. Chitvan Khosla

Privatization
DISCOVER . LEARN .
EMPOWER
Privatization

Course Outcome Will be covered in


CO Title Level this lecture
Number

CO1 It will help the students to identify Remembe


policies and parameters that should be r
considered when any governmental entity  
is planning to undertake some type of
privatization process.
CO2 It will enable the students to know the Understa
different aspects of law and legal setup nd
that affect the corporate world.  
CO3 Students comprehend the impact of the Understan
global factors on the environment. d
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Meaning of LPG and
Reasons for implementing it
• The economy of India had undergone significant policy shifts in the beginning of the
1990s. This new model of economic reforms is commonly known as the LPG or
Liberalization, Privatization and Globalization model.
• Some Reasons for its implementation:
• Large and growing fiscal imbalances.(Gross fiscal deficit rose to 12.1% of GDP in
1991)

• Growing inefficiency in the use of resources.


• Low foreign exchange reserves.($1.2 billion in January 1991)

• High inflation rate.(13.87% in year 1990-91)


• The low annual growth rate of Indian economy stagnated around 3.5% from 1950s
to 1980s, while per capita income averaged 1.3%.
Liberalization
Liberalization refers to relaxation of government restrictions in areas of economic policies.
Thus, when government liberalizes trade it means it has removed the tariff, subsidies and
other restrictions on the flow of goods and service between countries.
Liberalization

• The fruits of liberalisation reached their peak in 2007, when India recorded its highest

GDP growth rate of 9%.

• With this, India became the second fastest growing major economy in the world, next

only to China.

• The growth rate has slowed significantly in the first half of 2012.

• An OECD report states that the average growth rate 7.5% will double in a decade,

and more reforms would speed up the pace.


Privatisation
• It refers to the transfer of assets or service functions from public to private

ownership or control and the opening of the closed areas to private sector

entry.

• Privatization can be achieved in many ways-

• franchising, leasing, contracting, etc.

• Capital markets should be sufficiently developed to be able to absorb the

disinvested public sector shares.

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Advantages
• Privatisation may help in reviving sick units which have become a liability
on the govt.
• It helps the profit making public sector units to modernize and diversify their
business.
• It helps in making public sector units more competitive. Without
government financial backing, capital market and international market
forces public sector to be efficient.
• It reduces political influence on decision- making of managers.
Disadvantages
• Privatisation encourages monopoly, power in the hands of big business houses
and thus greater disparities in income and wealth.
• Privatisation may result in lop-sided development of industries in the
country.
• The limited resources of the private individuals cannot meet some of the vital
tasks which alter the very character of the economy.
• The private sector may not uphold the principles of social justice and public
welfare.
Disinvestment

Disinvestment can also be defined as the action of an organisation selling or


liquidating an asset or subsidiary.
The government appointed a committee under the chairmanship of C. Rang Rajan to
study and recommend new measures to make privatization more effective. The
committee submitted its report in 1993 which suggested the sectors where
privatization was needed and also suggested government to set up an autonomous
body to monitor disinvestment.
Disinvestment Commission
The five member Disinvestment Commission was set up on August 7, 1996. Major
tasks of the commission are:
• To prepare long term disinvestment programme
• To determine extent of disinvestment in each PSU
• To decide on instrument, pricing and time.
• To supervise sales process
As on 31 October 2013, the 50 Central Public Sector Enterprises (CPSEs) listed
on the stock exchanges contributed about 15% of the total market capitalization.
Successful Privatizations in India
• Lagan jute machinery company limited (LJMC)

Gross turnover: pre-privatization= Rs. 6 million (april-june 2000), post-privatization=


Rs. 24 million (july-september 2000)
• Modern food industries limited (MFIL)

Share value went up from Rs. 2138 on 30th Dec.(prior to sale) to Rs. 3247 on 25th

Feb.(post sale).
• Paradeep Phosphates Limited (PPL)

Net profit: pre sale= Rs. -57.95 Cr., post sale= Rs. 23.96 Cr.
• Bharat aluminium company limited (BALCO)
• Hotel Corporation of India limited (HCI)
• Hindustan Zinc limited (HZL)
Globalisation
• Economic globalization is the increasing economic interdependence of national
economies across the world through a rapid increase in cross-border movement of
goods, service, technology and capital.

• It is a process which draws countries out of their insulation and makes them join
rest of the world in its march towards a new world economic order.

• Current globalization trends can be largely accounted for by developed economies


integrating with less developed economies by means of foreign direct investment, the
reduction of trade barriers as well as other economic reforms and, in many cases,
immigration.
SUMMARY
For the purposes of this study, privatization can be considered as occurring any
time the government gives up some amount of control in any of several different
ways.
Examples include:
Authorities (Regional Transportation District)
Charters (K-12 schools)
Deregulation (Higher education procurement in Colorado)
Transfer of assets to a private entity (Workers Compensation/Pinnacol)
Contracting with for profit or nonprofit entities (e.g., building contractors, social
services)
Turning over a service (provision of, funding of) to
Assessment Pattern

19
APPLICATION
• Application of business environment can be as follows:
1. In area of Economic affairs
2. In analyzing business situations
3. Tackling the competition in business

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REFERENCES

• Reference Books-
• Mithani, D. M., International Economics, Himalaya Publications, New Delhi.
• Vaish, M. C. and Sudama Singh, International Economics, Oxford & IBH
Publishing Co. Pvt. Ltd

• References of websites-
• google.com
• https://www.toppr.com/guides/business-studies/business-environment/indian-ind
ustrial-policies/
,
https://study.com/academy/lesson/what-is-business-environment-definition-facto
rs-quiz.html

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THANK YOU

For queries:
Email: [email protected]

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