Privatisation of PSUs - Good or Bad?

Privatization of the sick PSUs is a vexing challenge in India. Is it required? What can be the implications of privatisation?

As said by Shri Ratan Tata "I am in favour of disinvestment. But if a disinvested company has to tie up with a government company for its livelihood, there is a problem". Disinvestment is reducing the shareholding of government in the state-run companies.

In the union budget of 2019-20, the government targeted disinvestment of Rs. 1 lakh crore and in this year, target if of Rs. 2.1 lakh crore. The shareholdings are then passed to the private player for enhancing production and proper management. Disinvestment is headed by the CCEA department under the Ministry of Finance.

Privatization Has Many Pros.

First, Efficiency, as it comes in the private hands, the efficiency of the product will increase by better management and mindset of profit earning.

 Second, Jobs, hiring will get faster as compared to the governments hiring that are time taking.

 Third, political interference, with no government stakes and holdings it would not be any more a political luring.

Fourth, sale, by reducing the stakes in money, it can be used for welfare purposes or other government expenses.

 Fifth, provisioning, as most of the PSUs are loss-making so to run them, the government needs to infuse money.

Privatisation Has Cons also

 First, monopoly, it would lead to the monopoly in the country, profits would be put first then the welfare.

Second, Government officials, as with the disinvestment, the government will lose its workforce.

Third, Public interest, public trust government companies more than the private.

Fourth, Income, government with reducing stakes will lose income and decision-making rights.

 Fifth, welfare, as private are more profit-orientated than welfare.

Way Forward

Disinvestment is a way to revive or loose the old and sick PSUs and in countries like India where hunger is a severe crisis, welfare cannot be put back.

Private companies should ask for leading in an area like the banks do by Lead Bank Area Scheme, else it will develop some specified areas and hilly areas, tribal will be left behind.