Is Privatization Lead to Less Corruption?

1. Is Privatization Lead to Less
Corruption?
Presented By:
Ravisha Sethi

2. Meaning Of Privatization
O Privatization is the process of participation of private sector in the
ownership and management of public sector.
O The term "privatization" also has been used to describe two
unrelated transactions. The first is a buyout, by the majority
owner, of all shares of a public corporation or holding company's
stock, privatizing a publicly traded stock, and often described
as private equity. The second is a demutualization of a mutual
organization or cooperative to form a joint stock company.

3. Privatization was introduced
during the eighties by Rajiv
Gandhi
The government of P.V.
Narsimha Rao gave actual
speed by introducing the
New Industrial Policy

4. Out of 16 industries, 6 industries are not reserved
for private sector. They are
Cigarette Atomic Indian
Energy Railways 4

5. Arms and
Ammunition
Chemical Hazardous
Fertilizers Chemicals 5

6. Methods Of Privatization
 Sale of the entire entity : The government sells
the entire public sector unit to private sector.
 Initial public offering :The government issues
shares to the public offering to reduce government
stakes.
6

7.  Management Control : Though not the
private company the government transfers the
management control to the new company to make it
more
accountable.
Sale to Employees : Employees have the first
choice to buy the shares of the shares of public
limited company when they are put for sale.
7

8. Examples
O BSCS was privatized
today it is owned by
Reliance energy
O Telephone companies
now are owned by private
companies also.
8

9. Hindustan and Bharat
petroleum planning to be a
part of Oman oil company to
have a great supply of oil to
India in lower price.
9

10. Positive Effects of
Privatization.
O Better services to the
consumers.
O Use of updated technology
which helps to reduce
wastage
10

11. O Helps in infrastructure
development with the
help of taxes received
from business firms.
O Helps the government to
concentrate on social
problem
11

12. Negative Effects of
Privatization
O Investment in
industries of comfort
and luxurious products
instead of necessary
products and problem
of optimum use of
capacity
12

13. Aims at making
profit which
adversely affect the
interest of the
community.
Problem of
unemployment.
13

14. Market share of privatization is
increasing year by year. 14

15. Does India need more
privatization?
O The central government owns public sector units which
have accumulated losses of Rs.52,551 crore losses
that India can no longer afford. Also that shareholders
are getting less return on their investment. So, India
needs to private more industries.
15

16. Governments role in
privatization.
O Government acts as a referee protecting both the
consumers and the investors. Government protects the
consumers from unwarranted prices.
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17. Impact Of Privatization On:
O Banking.
O Insurance.
O Education.

18. Banking Sector

19. Impact Of Privatization On
Banking Sector
O SBI enjoys a monopoly of the government
business.
O The government hold around 93% of the
equity, leaving 7% to private ownership.
O This act was outdated and needs to be re-
addressed.

20. O Later Indian government announced its decision
to reduce its stakes in public sector banks to
33%.
O Are the banks really sicks? The answer is No. The
public sectors are making profits.Then why this
outcry of privatisation ???

21. Why…Need of Privatization ???
O In early 80s, the Banking Sector in India was
dominated by the public sector banks which were
characterized by:
O High Intermediation Costs.
O Over-staffing and Over-branching.
O Huge portfolio of Non performing Loans.
O Poor Customer Services.
O Undercapitalized.
O Poorly Managed / Narrow Product Range

22. Rationale for Privatization
O Reduction in fiscal deficit.
O Increase in the efficiency levels.
O To foster competition.
O Broad basing of equity capital.

23. O Releasing resources for physical and social
infrastructure.
O So the need was felt to put some control over the
activities of the Nationalize banks.
O Privatization of banks was one such action.
O Example :
ICICI Bank

24. Benefits of Privatization
O There was a great increase in the no. of bank
branches after privatization from 8262 to 45,898.
O Branches in rural/semi-urban sectors increases from
2% to 40% after privatization.
O Credit to agriculture increases from Rs.162 crore to
Rs.4,46,496 crore.

25. O More job opportunities raise after privatization
which leads to increase in staff from 2,20,000 to
9,65,720.
O Because of credit misallocation, public sector banks
may be a bigger threat to stability than private
banks.
O Private sector bank loans growth is faster as
compared to public sector banks.

26. O There was a great increase in the efficiency of the
private banksas the control over bank employees
increases.
O Private sector banks provide many additional
services to its customers.

27. Insurance Sector

28. Impact Of Privatization On
Insurance:
O Government stakes in the insurance
companies to be Brought down to be 5%.
O Private companies with a minimum paid up
capital of 1 billion.
O 26% equity Capital.

29. List of Private Players in Life
Insurance
O ICICI Prudential Life Insurance
O Birla Sun Life
O SBI Life
O Tata AIG Life
O Aviva Life Insurance
O Kotak Mahindra Life Insurance
O Bajaj Allianz Life
O Ing Vyasya Life Insurance

30. List of Private Players in
General Insurance
O Bajaj Allianz General Insurance.
O ICICI Lombard General Insurance.
O IFFCO Tokio General Insurance.
O Reliance General Insurance.
O Royal Sundaram General Insurance.
O Tata AIG General Insurance.
O Cholamandalam MS General Insurance.
O Export Credit Guarantee Corporation.

31. Benefits
O Fast Growth.
O Rise of Premium income by 16%.
O Tie ups with banks.

32. Education Sector

33. Causes
O Growing importance of knowledge based economy.
O The advent of new technologies.
O Decline in quality of public sector.
O Change in public attitude towards education.
O Decline of public trust in public sector.

34. Models