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essay on privatisation in 250 words
essay on privatisation in 250 words

essay on privatization

  • Introduction to Privatization in India:

Under the process of economic reforms in India, steps were taken towards privatization in 1991, when the government decided to disinvest 20 percent in public enterprises. When countries smaller than India such as Thailand, Indonesia, Turkey, Tunisia, Brazil, Korea, and Malaysia went ahead in economic development through liberalization and privatization, we were forced to think in this direction. Even today we are hesitating to accept privatization boldly.

The main reason behind the adoption of privatization in India is the inefficiency of public enterprises. About one-third of the organized industrial sector in our country is in the public sector. Capital of Rs 2,52,554 crore is employed in 240 Central Public Sector Undertakings. Only 16.2 percent of total profit is being received on the capital employed.

Most of the people who are getting a profit in these ventures are monopoly companies. If departmental undertakings, such as railways, post and telegraph ports, etc., and state government undertakings are also included in this, then this appropriation will be manifold.

Apart from the inefficiency of the public sector, the government has also started emphasizing privatization under the developments of the world. The policy of liberalization has also been a major cause of privatization. For the public sector, the government has reduced the number of reserved industries to only 6.

Now only industries of strategic importance such as nuclear energy, the notification body of the Department of Atomic Energy, Government of India, S.O. O. 212 (E) dated March 15, 1995, only the goods and rail transport shown in the addendum remain in the public domain. Private investment has also been approved in the mineral policy.

essay on privatization in 250 words

  •  Factors Encouraging Privatization in India:

The following are the major factors that have motivated privatization in India:

(1) Eagerness of foreign companies and investors in India:

Companies and investors in developed capitalist countries face the problem of over-production and unemployment due to economic recession, so to deal with these problems, their attention turned to third-world countries where they have a wide market available and face less competition. have to do it.

From this point of view, India seems absolutely appropriate to them. India has also not remained untouched by these world-changing economic events and the government, inspired by the development of other developing countries, by implementing the policy of economic reforms and liberalization, has opened the doors for direct capital investment and establishment of enterprises in the country. This encouraged privatization in India.

(2) Economic Reforms and Liberalization:

In July 1991, the government made several announcements for economic reform and liberalization, including a reduction in industries reserved for the public sector, abolition of licenses and simplification, the exemption for expansion of large industrial houses, the exemption for foreign investors to hold up to 51 percent equity capital in the undertaking. , Devaluation of the rupee, full convertibility of the rupee, relaxation in FERA and other MRTP Acts, reduction in customs and excise duties, etc. are mainly included. As a result of these reforms and liberalization policies, an environment has been created in which private entrepreneurs can operate with more freedom.

(3) Reduction in the number of industries requiring licenses:

In order to promote privatization in the country, the requirement of licenses for industries is being gradually reduced by the government. In the industrial policy of 1991, there were 18 industries for which a license was mandatory to start, but today their number has been reduced to 5. At present, the license is mandatory only for the establishment of industries related to atomic energy and social security.

(4) Desire to increase the competitive power of Indian enterprises:

The government had provided protection to Indian industries for the last forty years. Due to this, these enterprises neither tried to reduce the cost nor improved the quality of their goods. For example, in 1956 the technology of the steel industry was the most advanced in our country as compared to the world, but today we are 20 years behind in steel-making technology.

So the cost of our steel is twice the cost of other countries of the world. Only one mill in Korea produces as much as we produce in our six mills. It is clear that if we have to sell our goods in the international market, then Indian enterprises have to be made competitive in terms of quality and price. For this, it is necessary that the nature of India's industrial economy should be competitive and this is also possible through privatization.

(5) Disinvestment of the share capital of public undertakings:

An important step in the direction of privatization has been taken by the Government of India it has disinvested or divested the share capital of some public enterprises. First of all, the Government disinvested shares of 30 PSUs in 1991-92, from which Rs 8,721 crore was received. Since then the process of disinvestment is going on. A target has been set to get Rs 10,000 crore in 2000-01 and Rs 12,000 crore in 2001-02 from the disinvestment of public enterprises.

(6) Broad Basis of Production Growth:

India has all the necessary components for increasing industrial production. Technical and managerial skills are available here, it is relatively cheap, natural resources are abundant, basic infrastructure is developed and most importantly there is a large domestic market available for the consumption of finished goods.

Therefore, by promoting the private sector, producers will be able to produce high-quality goods at low cost. If this happens, they will not only be able to establish dominance in the domestic market but will also be able to sell their goods in the foreign market.

(7) Reduction in the number of industry classes reserved for the public sector:

In the industrial policy of India, some industries have always been reserved for the government sector only. In the policy of 1956, 17 industries were reserved for the government sector. Later their number was reduced.

In the policy of 1991, their number was reduced to 8, but again in 1993, their number was reduced to 6 only. Now, this number is reduced to 4. In this way, the government has promoted privatization by limiting the reservation of industries for the public sector to only a few industries.

(8) Permission to set up banks in the private sector:

To promote privatization, the government has now given permission to private entrepreneurs to set up banks. Along with this, the government has made arrangements to release 70 percent of the share capital of nationalized banks to the private sector investors i.e. the public.

(9) Increasing debt burden on the government:

Under the industrial policy of 1956, the government had decided to develop the public sector on a priority basis. We continued to follow this till the Seventh Plan. During this period, the government obtained a large number of loans from international financial institutions and foreign governments to implement this strategy.

These projects were completed with these funds, but she was not able to repay the loans. Most of the public enterprises continued to run in losses and the government continued to support them with the funds available through loans. Due to excessive loans and interest, the government entered into a 'debt trap'. The solution to this problem lies in privatization, this will enable the efficient operation of these enterprises and the government will not have to take loans, and its liabilities will be reduced.

essay on privatization 250 Words


Difficulties or Criticisms of Privatization:

The process of privatization that is going on in India and it is said to make enterprises more competitive, there are many difficulties in which the main ones are as follows:

(1) Fear of Unemployment:

The biggest fear of the policy of privatization is the spread of unemployment among employees. Private companies will produce by adopting high technology, due to which employment opportunities will not be available. An example of this is Pepsi Food Products, which promised a large number of jobs, but actually provided jobs to very few people. Privatization will at least remove many employees, so they are afraid of it and are opposing it.

(2) Blocked road for competition:

In the process of privatization, the government invited foreign investors, producers, and multinational companies for competition, that is, for production in India, but did not provide the facilities that domestic producers and companies should have received.

In these domestic producers, like in other countries, the long-term exemption in taxes should be provided, Inputs used in production should be provided at a cheaper price, that is, the price at which it is available in other competing countries, only then it should be expected from the domestic companies that She will be able to compete properly.

(3) Priority to the production of high-tech goods:

One problem with privatization is that these companies wish to produce only consumer goods, most of which are luxury goods. The reason for this is that wherever the raw material is available in India for the production of these items, there is a huge profit potential in them.

Therefore, we should allow the production of only those items which require highly advanced technology and which strengthen the base of our infrastructure.

(4) Unnecessary pressure:

The policy of privatization should have been the result of our own efforts, but the result of American pressure and the policy of economic imperialism has been privatization and liberalization in our country. America wants India to accept 'Intellectual Property Rights'. Due to this, the prices of medicines will increase wildly in our country and our economy will go into the hands of multinational companies.

Along with this, he is also pressurizing India to implement the 'Production Patent' law. As a result of accepting this, we will become dependent on multinational companies for the production of agriculture and animal husbandry, electronics, computers, engineering, and medicines. Our entire economy will come under the grip of foreigners. Therefore, both the agriculture and industry sector are strongly opposing it.


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