UPSC Daily Editorial Analysis | 10 February 2022

Please Share with maximum friends to support the Initiative.





Samajho's Android app | Samajho's IOS app | Youtube Channel | Telegram Channel | Instagram Channel


IT’S TIME TO TAKE A RELOOK AT PRIVATISATION

What the article is about?

  • Talks about the need to revisit the privatisation strategy.

Syllabus: GS-III Effects Of Liberalisation On The Economy, Changes In Industrial Policy and their effects on Industrial Growth, Indian Economy

Privatisation:

  • Privatisation implies a change in ownership, resulting in a change in management.
    • The privatisation of public sector enterprises will occur only when govt. sells more than 51% of its ownership to private entrepreneurs.

Need to relook at privatisation strategy:

  • Studies indicate that the gap in growth (and service) between public sector undertakings (PSUs) with autonomy and private firms is not significant.
    • British privatisation initiative of British Airways, British Gas, and the Railways led to no systemic difference in performance
  • Growth post- privatisation is often due to multiple factors like:
    • Better funding under a private promoter versus a starved government budget, a better business cycle.
    • Sometimes, the difference in a PSU’s performance (and ability to generate tax revenue) is simply government apathy.
  • Privatisation as a revenue source has also offered paltry returns.
    • Actual receipts from disinvestment have always fallen significantly short of targets.
      • Ex.:- in FY11, ₹22,846 crores was raised against a target of ₹40,000 crores; by FY20, ₹50,304 crores was raised against a target of ₹1 lakh crore (PRS India, 2021).
  • Challenge of valuation:
    • Ex.:-About 65% of about 300 national highway projects have been recording significant toll collection growth (>15%, since they have been in operation); any valuations of such assets will need to ensure they capture potential growth in toll revenue, as NHAI’s highway expansion bears fruit and the economy recovers.
  • Social consequences with privatisation :
    • 348 CPSUs in existence in 2018, with a total investment of ₹16.4 trillion and about 10.3 lakh employees in CPSE (in 2019).
    • A push for privatisation is a push for mass layoffs, in a period of low job creation.
  • Greater concentration of public assets in select private hands is also a medium-term concern.
    • In India, about 70% of all profits generated in the corporate sector in FY20 were with just 20 firms (in comparison, the situation in FY93 was about 15%). 

Way Ahead:

  • Avenue of selective PSU reform could be considered
    • China model of corporatised PSUs; promotes better governance, appoints leadership and executes mergers and acquisitions.
    • Singapore model: Ministry of Finance focuses on policymaking, while Temasek (the holding firm) is focused on corporatising and expanding its PSUs towards a global scale.
  • A PSU with greater autonomy, with the government retaining control via a holding firm, can also be subject to the right incentives.



Please Share with maximum friends to support the Initiative.

Download the Samajho App

Join 5 lakh+ students in downloading PDF Notes for 2000+ Topics relevant for UPSC Civil Services Exam. &nbsp Samajho Android App: https://bit.ly/3H9hva1 Samajho iOS App: https://apple.co/3H8ZJE2 &nbsp Samajho IAS Youtube Channel (300K+ Subscribers): https://www.youtube.com/@SamajhoIAS