Psu Privatisation Pros And Cons

Privatisation means transferring the control of an enterprise from the government sector to the private sector. Generally, but not always, this also means transferring ownership of the Public sector enterprise as well as control.

It can be accomplished by sale or lease. It can be accomplished by the government selling 100% of an enterprise, or selling 51%, or even by selling a minority stake - so long as the private sector is given full managerial control. Without transferring control to the private sector, the government can rise money by selling a smaller share, but that is not privatisation as such.

PROS

* Stops loss-making PSUs from adding to government debt;

* Depoliticises PSUs, remove governmental pressures for over-manning and the sub-optimal use of resources;

* Gives new owners a strong incentive to turn around failing PSUs into successful businesses;

* Gives new businesses access to investment capital that government cannot provide;

* Raises more money for government through taxing former PSUs;

* Expands an enterprise and an industry, in the long run creating more jobs and generating wealth for the country.

Enterprises need to be efficient and competitive or they lose money, and the government cannot afford to subsidise such losses. And governments anywhere are not very good at running businesses. Whether the private owner is an individual, or a corporation with thousands of shareholders, peoples' own money is at stake, so they have a strong incentive to work night and day to ensure that their enterprise becomes successful and profitable. Government lacks those incentives, so government-managed enterprises fail to perform across the world.

privatization change enterprises

Ultimately, privatization gives new life to an ailing PSU. But initially, privatisation changes three things -- incentives, priorities and access.

* No one worries about economizing when they spend government money, but everyone worries about spending his or her own private money. So private owners and their employees have a stronger incentive to make their own enterprise succeed;

* Bureaucrats' top concerns are obeying elected leaders, keeping peace with the unions, and other concerns which are essential in government. But these are not the main priorities of business. The priorities of business are cot-efficiency, competition, and satisfying the customers. So, compared to businesses, PSUs often suffer from interference or neglect. For private owners, the economic success of their enterprise is their top priority;

* Even when a PSU is well-managed, cash-poor governments cannot give it the investment capital it needs for new equipment and staff-training. Private owners have better access to investment money to help the business grow.

privatization change whole economies

Privatisation can make poor economies richer, increasing development far beyond the immediate sectors being privatized. Basically,

* It reduces the economically-crippling government debt;

* It turns loss-making, tax-eating PSUs into profitable, tax-paying businesses, giving government more money to spend on infrastructure, schools and hospitals;

* It provides goods and services more efficiently than under government management, generally resulting in better service and lower prices to consumers;

* It expands services using access to investment capital, so that electricity and other necessities are available to more people;

* It makes better-trained young employees, building up a national talent-pool which attracts more investment to Andhra Pradesh in many new and different sectors;

* Over time, it spreads share-ownership, letting more and more ordinary families share in corporate profits and build their own wealth;

* It convinces potential partners that INDIA is a good place in which the invest their money, creating newer and bigger industries and more jobs.

Our government should stop trying to compete with the private sector. Let our businessmen and businesswomen excel at providing goods and services, and let government do what it does best вЂ" governing

WHY Privatise Profitable PSU ?

Privatisation works for profit-making and loss-making PSUs alike. Governments privatize profit-making PSUs for three reasons:

* Governments get money from the sale of the PSU which they can be better utilised elsewhere, retiring debt or building infrastructure;

* Profit-making PSUs, once privatized, tend to grow even bigger with increased access to investment and skills. This increases employment and boosts tax revenues for government;

* Growing larger and more efficient, the privatized enterprise can often provide goods and services at even lower costs