privatization in India

Presented By :Aashima Arora – C 03Animesh Bharti – C 08

Lavanya K. – C 19Ankita Pandey – C 33

Kala Swaraj – C 53

What is a PSU ?

Government owned enterprise Majority stake (more than 51%) held by govt Classified into three types : a) CPSE b) PSE c) PSB

PRIVATISATION

Privatization is defined as transfer of ownership and management of enterprises from the public to private sector.

Relatively new concept, originated in 1980’s The term coined by Peter F Drucker Margaret Thatcher : Gave it an identity in

practical terms

Reasons For Privatisation

Goals Of Privatisation

WHY PRIVATISATION Inability to improve management system

and respond to challenges of globalisation Inability to be flexible and efficient in the

face of competition.eg BSNL Inability to sustain long term funding of

losses of PSU Deregulation of industry, in order to enable

firms in the public sector to compete & survive

Why privatisation (contd...) Exposing firms to market discipline and

promoting wider share ownership. The need to raise FDI for increased in the

country. It injects new value into public assets and

increases privately held capital base of country

Liquidity constrained government facing fiscal pressure in a view to finance fiscal deficits.eg argentina in 1989

PROBLEMS FACED BY PSUs

Contd…

Contd…

• offered postal and package delivery services, banking services, and life insurance

• over 400,000 employees and ran 24,700 post offices throughout Japan

• Japan Post also held about ¥140 trillion (one fifth) of the Japanese national debt in the form of government bonds

• government-owned corporation from 2003–2007, nation's largest employer

• On October 1, 2007 Japan Post was privatized following fierce political debate that was settled by the 2005 general election

2007

Lagan Jute Machinery Corporation Limited

LJMC BEFORE & AFTER PRIVATISATION

Particulars Pre-privatisation Post -privatisation

Gross Turnover Rs 6 million Rs 24 Million

Profit/Loss Incurred Loss Showed Profit

Orders Booked Rs 12 Million Rs 15 Million

Export of Spares

Rs 0.5 Million Rs 1.6 Million

Source : http://www.divest.nic.in/chap10-old.asp

Disinvestment In PSU’s

• Need originated as PSU’s till 1991 had negative ROR• Affected as per Statement of Industrial

Policy 1991• Part of Government shareholding

thrown open to other financial institutions

• Primary Objective was to raise capital for further growth & convert them from liabilities into assets

Methods Of Disinvestment

PSU’s Undergone Disinvestment

NAME % OF GOVT EQUITY SOLD

STATUS DURING DISINVESTMENT

BALCO 51 Profit making

Maruti Udyog Ltd. 4 Profit making

HCI Hotels 100 Loss making

ITDC 51 Loss making

IPCL 26 Profit making

VSNL 25 Profit making

Lagan Jute Machinery Corp

74 Loss making