Privatization of Public Sector: Will it elevate the Indian Economy in COVID-19?

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By Archana Pandey from Jamnalal Bajaj School of Legal Studies Banasthali Vidyapith

Introduction

The biggest tragedy of the 21st century is the covid-19 outbreak. It is a sudden and dramatic change that happened in everyone’s life. Every individual that belongs to any society or any community has been disturbed by this coronavirus. It is not only creating problems to humans and animals but also effects the economic situations of each and every country. There is a sudden burden that has come on the heads of the government such as providing all the necessary items like food to everyone, to maintain and make stabilize the economy. The government’s decision for this drastic change in the Indian economy is privatization of public sector to the private sector. This outbreak eventually disturbs the economy of every country so there is a need to get the economy on the track. Privatization can be defined as moving something from the public sector to private sector, the control turns over from the government to the private companies and organisation. Covid-19 with privatization gives something of a different composition of the economy. Due to which the economy molds itself in different direction. COVID-19 Lockdown creates a lot of problems to the people every age, profession, society from richer to the lower class. It affects everyone’s life as it is a force majeure which means an unexpected and unforeseen situation which cannot be controlled by any human power as it may be done by the natural system or by any human activity. This lockdown immensely pressurizing the government and normal person as there is no sort of way by which they can earn money and have their economic welfare. It affects their mental health and the economic system of the country. The government also has to focus on the treatment of Corona Virus and also have to maintain the economy of the nation. There are so many ways by which the problem of controlling the economy can be resolved.

Therefore the first and foremost solution of this problem is Privatization.

On 17th May 2020, as part of a stimulus package the Finance minister Nirmala Sitharaman announced that the government will privatize all Public sector enterprises in non-strategic sectors. She also stated that in strategic sectors, the number of PSU’s will be limited to 4. In strategic sectors with more than 4 PSU’s, the government will privatize, merge or consolidate the PSU’s under holding companies in order to reduce wasteful administrative costs. Nirmala-ji stated that there is a need for a coherent policy where all sectors are open to private sector participation while PSU’s play an important role in defined areas.

Privatization means when a government owned business operation or any property becomes owned by a private company. All the rights which are reserved by the government is now transferred to any private organization now the private company is liable to form policies look after the companies growth and would be held liable for any sort of damages caused by them. Now there is no liability the government towards that particular sector. Although the government made some changes in the fiscal policy and some changes in the price, or policies of that company but it could not be efficient to have the power to control that specific company.The ownership goes to that specific company so it helps the government to save money increase efficiency because private companies can move goods quicker and more efficiently.

The Government of India (“GOI”) introduced a slew of reforms from May 13th to May 17th 2020 (“Reforms”). Amongst other reforms one which stood out boldly was the GOI’s intent to privatize public sector undertakings (PSUs) or public state-owned corporations.

Part 5 of the Reforms clearly stated that the GOI would soon announce a policy whereby

  1. List of strategic sectors requiring presence of Public Sector Enterprises (PSEs) in public interest will be notified
  1. In strategic sectors, at least one enterprise will remain in the public sector but private sector will also be allowed
  2. In other sectors, PSEs will be privatized (timing to be based on feasibility etc.)
  3. To minimize wasteful administrative costs, number of enterprises in strategic sectors will ordinarily be only one to four; others will be privatized/ merged/ brought under holding companies

Advantages of Privatization

  • Increase efficiency: The private companies works along with them own profit. When the question arise for the increment of own self then person works more efficiently and give his full potential.
  • Lack of political interference: When the companies go privatized then there is a less interaction of the political part of the government. Now the whole liability arise on the shoulders of the company so no government is iteration interfere in the policies of that company.
  • No ownership presser: The government institutions think about hits upcoming election song doesn’t do any investment which will help the form but when it gets privatized the owner has no pressure take care about future opposite party or any sort of elections.
  • Increased competition: In the hands of government there is no competition because the whole soul power is in the hand of the government. What after privatization the company must have to look after their competitor in the market is they also have to form policies which bring more buyers to them.
  • Government revenue rose: The privatization of a company leads to the ownership from the government any other private organisation. So the private organisation must have to pay taxes to the government for running such organisation which increases the revenue to the government.
  • Shareholders: Shareholders other person who have their shares in that particular firm. Theypressurize the members to work efficiently e as they may be possibilities to struck down the organisation. But in the government there are no stakeholders so there is no pressure to work efficiently.

Disadvantages of Privatization

  • Monopoly: When a particular organization is handling sector then the problem of monopoly arises. It creates problems to the buyer as the seller himself decided the price and policies regarding a specific product.
  • Public Interest: There is lack of public interest as privatization of the company interest moves towards private as that used to think about its own profit rather than of welfare of the society.
  • Fragmentation of industry: When the privatization had the industry which in the hand of government diverted to the private organizations so the matter industry fragmented between different individuals.
  • Short termism of firm: Unlike the government, the firm also has short term issues. The firm has shareholders pressurize the individualthat he doesn’t work properly then he can also face loose shareholder position.

Evolution of Privatization

Earlier economy was governed by the government of particular Nation. Each and every sector including railway water any other comes under the regulations ofgovernment and a government is held liable for any sort of damages problems. No any private organisation is benefited by the sector. Likewise in 1980s, the word is doing for different perspective on the economy and it starts privatization of different sector that is governed under the government. In India also there is role of government every sector than of Privatization. In 1991 India made some changes in their economic ideology because there were stagnation and slow growth in the economy.

The new form of model was formed by the Congress party in the rule of finance minister Dr. Man Mohan Singh. He introduced some major changes and economic reforms. The new model named as LPG reforms in which represents liberalization p represent privatization and z represents globalization. After that project economy of India comes in its forefront has it improves from the previous one. Many government sectors got privatized GDP for Gross domestic product of India.

Lockdown and Indian Economy

The lockdown affects each and every individual where ever in the world. It has a deep impact on not only the mental health physical health but also so the economic structure of any country when there is a total lockdown in the nation each and every business was struck down institute of health and necessary things. GDP of India also falls downand people have no work to do 2 and way to earn money. This lock down results in sharp rise of unemployment, stress on supply chain, decrease in government income, reduced consumer activity, collapse of the tourism industry, plunge in fuel consumption and rise in LPG prices. Indian government face problems in maintaining each and every sector is it has no money so the way government find suitable to to reduce this car city of resources is privatization of  few sectors. Some of the previous privatization done by the government include increase the private partnership in Indian railways, bite sale hundred percent stake in Air India and attempts to disinvest oil and gas companies live Bharat petroleum SAIL, shipping corporation of India(SCI), THDC India and NEEPKO and others. India will privatize all electricity distribution companies (discoms) in the Union Territories. The Indian railway has also decided to privatize trains in its network. The railway meets with a great resistance not only from railway but also from the rail users. The citizens are arguing that by doing privatization it will create problems to them and will have a great loss to the nation. The Indian Government clarifies its decision by saying that it will enhance the efficiency of the work and also helpful to the nation. But there are allegations on the government that it is a bad decision in the nation economy.

Conclusion

According to above esteemed information and research it can be understand that every particular ideology has different perspective and two sided i.e. positive or negative one. In one interface, privatization can be considered as a boon to the economy as it enhances the efficiency of the work and also emerges revenue. On the other hand, it seems that Privatization is the worst policy as the government has no control over particular organization, problem of monopoly arises etc. This all depends upon the way you used or have a perspective to any policy.

References

http://www.researchgate.net

www.indiatvnews.com

http://economictimes.indiatimes.com

http://www.investopedia.com

www.indianexpress.com

http://www.civilseviceindia.com

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