Disinvestment of Public Enterprises
The
process of industrial restructuring continued in response to the new industrial
policy of 1991. The new policy suggested the partial disinvestment of public
sector without fixing any ceiling. Citing fiscal crisis as the reason,
comprehensive efforts have been initiated subsequently to disinvest the equity
of public sector undertakings to a greater extent. This is nothing but the
outright process of privatization. There are three models viz. public offer,
strategic sale and cross holding. The Government announced in 1998 to sell more
than 51 percent in strategic sales and the new cap was fixed at 74% to 100%.
The
objective of disinvestment is to mobilise enough resources by way of
withdrawing from some sector in order to invest in priority areas like
particularly social sectors. The mobilized resources are used to repay the
public debt of the government to pay for various VRS schemes, labour retrenchment
and redeployment schemes under the exit policy.
The
other objectives include the promotion of private sector, enhancement of
efficiency and competition. In 1991-92, over Rs.30 billion was raised through
the disinvestment of public sector. In 1992-93, Rs.18.6 billion against a
target of Rs.35 billion was raised. Until 2002-03, a huge resource of around
Rs.300 billion was raised through the disinvestment policy.
Though
the policy of disinvestment is criticized vehemently by the left parties and
trade unions, the government is moving towards further disinvestment of many
Public Sector enterprises including the strategic and profit making
enterprises.
Liberalization and Privatization
Liberalism
means the order of the market or capitalist economy relying predominantly on
competition and private sector. It envisages freer trade, full convertibility
and non-discriminatory tariffs. Liberalisation policies aim at minimizing the
roles and functions of the government in the economy to promote private sector.
It aims at more external capital inflows to finance the current account
deficit, to augment capital formation to generate exports earnings to raise
efficiency of capital used in India to improve the quality of the products. In
India, the forms of liberalisation policy initially have been on general
liberalisation of controls or marketisation and deregulation followed by
privatization.
Privatization
policy has been adopted as a part of the liberalisation. Privatization is
defined as transfer of ownership from public sector to private sector. It is
the process of reducing the role of State or public sector in the economic
activities of a country. Privatisation is expected to ensure efficiency in the
allocation of resources and promote faster growth.
In
India, the process of intense privatization has been initiated since 1991. The
various methods through which it has been undertaken includes disinvestment
measures (i.e. setting the public ownership to private sector), deregulation
and delicensing measures for the entry of private sector industries into the
reserved public sector domains, surrendering the control and management of
public sector enterprises to the private sector and by halting any further
public investment and diversification.
Thus,
public sector restructuring refers mainly to disinvestment or denationalization
of existing public sector enterprises, liberalisation and privatisation through
deregulation and delicensing ultimately limiting the role of public sector to
social and economic infrastructure.
The
Eighth Five Year Plan (1992-97) clearly argued that considerable restructuring
was necessary to reach the new goals of public sector within the framework of
New Economic Policy. The new goal is 'public sector industry has an important
role as an autonomous, competitive and efficient
sector to provide essential infrastructure goods and
services, development of natural resources and areas of strategic concern'. The
following are the integrated strategies devised by the Eighth Plan for public
sector restructuring:
Restructuring involving
modernization, rationalisation, product-mix changes, selective exit and
privatisation.
Increase in autonomy and performance
accountability through the system of Memorandum of Understanding (MOU) between
the administrative ministries and central public enterprises launched in the
Seventh Plan.
Changes in management practices at specific enterprises
level to promote efficiency, dynamic leadership, resourcefulness and
innovation.
A major effort by state governments
to promote reforms in public sector.
Technology upgradation through an integrated R & D
effort and import of technology.
Re-orientation of approach in
ministries and other government agencies regarding liberalisation and
dismantling of regulations.
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