Short Note – Privatization in India

Privatization can be described as the transfer of state-owned enterprises (SOEs) to the private owners. SOEs in India include various public sector undertakings (PSUs), State enterprises and banks. It has been described by most economists as the need of the hour and has become a common economic policy tool around the globe.

However, the increasing trend towards globalization is being increasingly debated as trade unions claim that the job security to employees of the SOEs will be withdrawn and the companies would focus more on corporate profits for a select few.

In India, apart from a very few select PSUs (ONGC, IOCL), most SOEs are reeling under heavy losses. They suffer from an aging workforce, lack of modern technology, orders, and availability of raw materials. They do, however, sit on valuable land and have infrastructure than being monetized for the government. Thus, the government sets a target of disinvestment every year.

The proceeds from the disinvestment can be used for financing the fiscal deficit, improving large scale infrastructure development, reducing government debt and for social programs for improving healthcare and education.

Some disinvestment in India is coordinated by the Department of Investment and Public Asset Management (DIPAM) which issues the guidelines for the monetization of non-core assets of Central Public Sector Enterprises (CPSEs) and immovable enemy properties.

However, there is a need to perform the proper cost-benefit analysis of any PSU being divested. While PSUs like Air India, BSNL, etc are suffering from high losses, the government can divest them in a judicious manner and after following the duly established process.