Measures taken for Privatisation
1] Dereservation policy
The public sector entering new areas of industrial and technical competence, a number of problems like insufficient growth in productivity, poor project management, over-manning, inefficiency etc. The result is that many of the public enterprises have become a burden rather than being an asset to the Government.
Therefore, that the Government has adopted a new approach to public enterprises. Measures were taken to make these enterprises more growth oriented and technically dynamic
The state monopoly was ended in many areas. Privatization reduced the number of industries reserved. for public sector has been reduced. to three industries. All other industries are opened up for the private sector.
Jet airways, King fisher in domestic airways, Reliance energy in the power sector, Air-cell and Tata indicom in communication are some examples of privatistion.
2] Establishment of Board of Industrial and Financial Reconstruction [BIFR]
Board of Industrial and Financial Reconstruction [BIFR] has been set up to take decisions regarding sick public sector units [PSUS]. The board studies whether there is a possibility of revival of sick units or not? If not they are allowed to wind up or privatise,
3] Creation of National Renewal Board [NRB]
When the loss making PSUs are closed, the workers have to face the problem of unemployment. Therefore National Renewal Board [NRB] was set up to take care of retrenched workers. The board also provides compensation to employees who take voluntary retirement.
4] Navratna status
On the basis of strategic importance and performance, to improve the quality of functioning and to make them aware of their responsibilities ,, nine public sector enterprises were selected and given the status of “Navratna”. They are given full financial and managerial freedom to make them global giants. Those are
1] I.O.C.- [Indian Oil Corporation]
2] O.N.G.C- [Oil and Natural Gas Corporation].
3] H.P.C.L- [Hindustan Petroleum Corporation Limited].
4] B.P.C.L- [Bharat Petroleum Corporation Limited].
5] I.P.C.L- [Indian Petroleum Corporation Limited].
6] V.S.N.L- [Videsh Sanchar Nigam Limited].
7] B.H.E.L- [Bharat Heavy Electricals Limited].
8] S.A.I.L- [Steel Authority of India Limited].
9] N.T.P.C- [National Thermal Power Corporation].
The most important step undertaken to reform the public sector is disinvestment. It means the government decides to sell the equity capital of public sector undertakings to private individuals, private corporate bodies and financial institutions.
In India disinvestment is undertaken as a fiscal need. It means money is raised through disinvestment to reduce fiscal deficit.
Disinvestment means withdrawal of invested funds from a public sector company. to raise funds for meeting certain general and specific needs. The government’s disinvestment policy was identified as an active tool to reduce the burden of financing the PSUs. and to utilize the funds that become available post disinvestment, for several purposes. to create more useful assets such as schools hospitals and other rural and other infrastructural facilities etc. Disinvestment also ensures autonomy, flexibility and competition.
6] Memorandum Of Understanding [MOU]
The Memorandum Of Understanding [MOU] is signed between the Company and Ministry. The MOU intends to grant a greater degree of autonomy to the public sector enterprises in the field of management.
Efficiency of public sector unit was sought to be increased by allowing competition from the private sector.
7] Removal of mandatory convertibility clause
The new industrial policy of 1991 has removed the mandatory clause which empowered financial institutions to convert their loans to industries into equity shares. This will stop the entry of public sector into private sector and encourage the growth of private sector.
Under this process a public enterprise may be leased out to a private bidder for a specified period for use without transferring the ownership.
9].Greater role for the private sector
A major change in the 1991 policy was the enlargement of the scope of the private sector. A number of industries which were denied to private sector earlier were thrown open to them. The private sector has also been allowed to attract foreign investment and collaborations. Many government controls which affected their growth were removed. The government made it clear that it will be a facilitator rather than regulator for the development of the private sector. It also indicated its willingness to use market related prices and incentives rather than rules and regulations to develop the private sector.