Privatisation - Advantages

2 min read
  • Back in 2022, privatisation of Bharat Petroleum Corporation Ltd (BPCL) was on the priority of the government. But on 11 June, the government announced that it had shelved the plan. 
  • ! the government’s divestment target for FY 2024-2025 is Rs 50,000 crore. 

two major rounds of PSU privatization

  1. between 1999-2004 and
  2. started in 2014.

Reason for privatisation

  • people must be consistently reminded about who pays for the loss that PSUs make.
    • before its privatisation, Air India’s annual loss was upwards of Rs 8,000 crore
    • in 2023, the State-run Bharat Sanchar Nigam Limited’s (BSNL) annual loss was Rs 8,161 crore.
  • PSU is profit-making is not justification enough that the government should run it. The question is, what would its value be if the ownership was transferred to the more efficient manager, i.e., a competent private player?
    • Hindustan Zinc Ltd : first tranche was sold during the Atal Bihari Vajpayee government in April 2002, and the second one was sold in November 2003 to a company belonging to Vedanta group
      • the government retains a 29.54 per cent stake in the company.
      • From that point to today, the company’s market capitalisation has grown over 150 times.
      • The benchmark NIFTY 50 index has grown 21 times over the same period.
      • While there were 10,608 employees at the company in 2001, the number grew to a little over 23,000 in 2023.
    • other PSUs privatised during 1999-2004—
      • Modern Food Industries,
      • Jessop & Company,
      • Bharat Aluminium Company Ltd (BALCO),
      • CMC Limited — have shown similar and significant change in profitability post privatisation, as per the Economic Survey of India (2020).
  • concern that private players may exclude the poor people.
    • regulations can be used to ensure that low-income households are adequately served without the government running businesses themselves. Print
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