Disinvestment of Pblic Sector

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ROLE OF PUBLIC SECTOR IN INDIAN

ECONOMY

1)Contribution to capital formation- The role pfpublic sector in collecting savings and investing them

in the planning era in terms of nationalised

banks,industrial development banks,UTI,etc.

2) Development of infrastructureAfter

independence ,public sector has played an

important role in building up of infrastructure as theprivate neither has the resources nor the willingness

to invest in this field.


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3)Building of strong industrial base- A large

number ofcapital goods industries and basic

industries like iron and steel,coal heavyengineering,chemicals,etc have been set up by the

public sector which are essential for the future

development of the country.

4) reduction in regional disparities- pubic

sector has set up large number of industries in

areas which were neglected by the privatesector.


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Contribution to import subsitution

and export promotion-India has faced foreign exchange

constraint for many years after planning

.public sector has helped the country insolving this problem in two ways:-

a)import subsitution

b)export promotion


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Disinvestment and PrivatisationAlthough the public sector enterprises have

played an important role in development of

economy,yet extensive studies done on the

performance of PSE reveals that the performance

of PSE is far from satisfactory.All 3 essentialelements of performance measurement referred

as:

EFFICIENNCY,EFFECTIVENESS AND ECONOMYshowed poor performance of PSE.As a result govt

started to deregulate the areas of its operation

,Disinvestment of PSE was announced.


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RATIONALE OF PRIVTISATIONAND DISINVESTMENT


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Privatisation-meaning and obj.Privatisation may be defined as the transfer of a

funtion,activity,or organisation from public to

private sector. The most imp objectives of

privatisation are:-

a)Improving the governments financia position.

b) Improving the performance of an enterprise


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Disinvestment Programme in IndiaThe main aim of disinvestment by govt is to

bring down its equity in all non strategic

public sector undertakings to 26% and close

down those public sectors which cannot be

revived.

For the purpose of privatisation ,the

government has adopted the route ofdisinvestment which involves the sale of

public sector at large.

Disinvestment can be partial or complete


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Partial disinvestment means that onlya part of the shares of the public sector

undertaking is sold.Complete disinvestment means the

entire share of the govt. in a public secor

undertaking is sold.


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programme adopted by govt are:-

1)Raising resources

2) Reducing day to day interference in theworking of public sector undertakings by the

government officials.

3)To increase the levels of efficiency of theoperations of public sector enterprises by giving

autonomy to the management to act on their

commercial judgement.The actual experience of disinvestment programme

adopted y the govt. shows that the main focus of the

government has been on raising resources to finance

the budget


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PROCEEDS FROM DISINVESTMENTThe govt.adopted two methods of investment:

1)selling of shares in select PSU

2)strategic sale of PSU to a private company.

- the achievements of disinvestments in differentyears over the period 1991-92 to 2010 can be

realised through disinvestment during 1991 to

dec. 2010 which stood at Rs99,739

crores as against the target of 96800 crores for

the period 1991-92 to 2004-05.


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- Initially in 1991-92,the govt. offered shares for

sale in bundles involving a combination ofequity from poor and good performers.

-In 1992-93,the govt.abandoned the bundling of

shares and sold shares of each companyseparately by auction method.

-In 1994-95 NRI,and other persons were allowed

to participate the auction

-Global depository reciepts ofVSNL and MTNL in

international markets fetched Rs 380 and910

crores respectively.


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-From 1999 to 2005 focus of govt.shifted to

second method of disinvestment-the

strategic sale of PSU to private sector

companies like Modern food india

ltd.,VSNL,BALCO,ITDC,Maruti Udyog ltd.,etc.

After 2004-05 ,disinvestment realisation

have been through sale of small portions of

equity.


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PRIVATISATION AND

DISINVESTMENT:ACRITIQUE

Documents

Disinvestment of Pblic Sector