This presentation gives a basic view on the meaning of Privatisation and Disinvestment.

1. PRIVATIZATION
AND
DISINVESTMENT
Submitted By –
Pragati Mehndiratta

2. Business Environment
Business environment is a
combination of all factors that
influence a business.

3. Introduction
 Before 1947, activities of public sector were restrict
ed to a limited field like irrigation, power, railways,
ports, communications and some departmental
undertakings.
 After Independence, the area of activities of the publ
ic sector expanded at a very rapid speed.
 Industrial policy resolutions of 1948 & 1956 ensured
that the activities of the private sector will not be curbe
d.

4. Introduction
 These polices divided the economy
broadly into two.
Some activities were left for public sector,
some for both public and private sector, and
some entirely for private sector.

5. Privatization
 Privatization means transfer of ownership
and or management of enterprise from publi
c sector to private sector.
 Privatization the transfer of ownership of
State Owned Enterprises (SoE) to the priva
te sector by sale (full or partial) of going con
cerns or by sale of assets after the liquidatio
n of the company
- World Bank

6. Privatization - History
The seeds were laid in the UK in
1960s.
First mentioned in 1960 in the
book : The Age of Discontinuity by
Peter Drucker.
Spread in 1970 by the then PM
Margaret Thatcher.

7. Privatization - Objectives
To increase efficiency & competitive power
of the enterprises.
To strengthen industrial management.
To earn more & more Foreign currency.
To make optimum use of resources.
To achieve rapid industrial development of
the country.

8. Privatization - Advantages
Reduction in economic burden
Increase in efficiency
Reduction in sense of irresponsibility
Scientific Management
Reduction in Political Interference

9. Privatization - Disadvantages
Lack of social welfare
Class struggle
Increase in inequality
Increase in unemployment
Exploitation of weaker section

10. Disinvestment
The action of an organisation or
government selling or liquidating an asset
or subsidiary

11. Disinvestment - Objectives
 To reduce the financial burden on gover
nment.
 To improve public finances
 To introduce, competition and market
discipline
 To increase growth of the firm
 To encourage wider share of ownership

12. Disinvestment - History
The Indian economy had virtually embraced
bankruptcy during the period of 1980-92.
In 1991, there was 236 operating public sec
tor undertakings, of which only 123 were
profit making.
The top 20 profit making PSU’s were respo
nsible for 80 percent of profits.
The return on public sector investment for th
e year 1990-91 was just over 2 percent.

13. Disinvestment - Advantages
In Private Sector, the decision making
process is quick.
Better corporate governance, exposure to co
mpetitive markets.
Loss making PSUs can be revived which can
boost up the economy.

14. Disinvestment - Disadvantages
 Selling of profit-making PSU results in loss
of regular source of income to the government.
 Asset stripping by the strategic partner.
 Disposal of profit making PSUs.

15. Questions?