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Context: There is consensus among policymakers for privatisation of public sector undertakings (PSUs), especially in neo-liberal world order, for its ability to grow faster.
What is the reality of Privatisation?
Performance of Privatised Firms not guranteed: The gap in growth (and service) between PSUs with autonomy and private firms is not significant.
Performance may be due to other factors: Growth post-privatisation is often due to multiple factors (for example, better funding under a private promoter versus a starved government budget, a better business cycle). Sometimes, the difference in a PSU’s performance is simply government apathy.
Low Realisation of Revenues: Privatisation as a revenue source has also offered paltry return with actual receipts from disinvestment always significantly short of targets. For example, in FY11, Rs 22,846 crore was raised against a target of Rs 40,000 crore; by FY20, Rs 50,304 crore was raised against a target of Rs 1 lakh crore.
Outright Privatisation has not been yielding results in India. Aside Air India, a recently held auction of about 21 oil and gas blocks had only three firms participating, of which two were PSUs; 18 blocks ended up with just a single bid.
Concentration of public assets in select private hands: In India, about 70% of all profits generated in the corporate sector in FY20 were with just 20 firms (in comparison, the situation in FY93 was about 15%). Across sectors oligopoly is emerging. Such concentration, mixed with privatisation of public assets, is likely to lead to higher usage fees (already being seeing in telecom) and inflation, coupled with a loss of strategic control.
Are there any alternative models for Privatisation?
Corporatisation of PSUs under Holding Company
By: Shubham Tiwari ProfileResourcesReport error
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