What are the important elements of Privatization in the Indian context ?
May. 12, 2017
Privatisation has several meanings. Primarily, it is the process of transferring ownership of a business, enterprise, agency, public service, or public property from the public sector (a government) to the private sector, either to a business that operates for profit or to a nonprofit organization. It may also mean the government outsourcing of services or functions to private firms. In Indian context, following are the important elements of privitisation : 1) Deregulation of industries ; Under New industrial policy, indistries like iron and steel, electricity, air transport, ship building etc have been opened up for the private sector participation. Now only 6 industries continue to remain reserved. 2) Abolition of industrial licensing : Except for small number of industries where strategic or environment concerns are paramount requirement of licensing has been totally dispensed with, 3) Removal of investment controls on private sector - The MRTP act 1969 made statutory that all firms with assets above Rs 100 crore be classified as MRTP firms governed by MRTP Act. The new industrial policy has relaxed the norms of industrial approval. In the amended act, such firms did not require prior approval of the government for investment in the de-licensed industries. 4) Foreign investment and policy ; The limit of foreign equity holding was raised from 40 percent to 51 percent in the case of high priority industries. 5) Public sector - There is greater emphasis on performance improvements of public sector enterprises through the MOU route through which management would be given greater autonomy to facilitate the fuller discussion on performance. 6) Contracting out - For specialised services, contracting out to outside agencies has been emphasised. 7) User charges on public utilities - The 12th plan document has stressed on the increase in user charges on public utilities such as irrigation, electricity, water and higher education. This means application of commercial approach to more traditional public goods and recovering their costs by charging the user rather than from general revenues.