Disinvestment

Posted Date: 14-Apr-2010	Category: General
Author: VARUN VERMA	Member Level: Gold	Points: 10

The aim is to cut down the government's holding in loss making Public Sector Units to 26%. It will reduce the government borrowing to meet it's expenditure. The new management can revive the sick units with new staff and new technologies.

Disinvestment

India is a socialist country where public sector has played a major role during development stage of India. There was a time when infrastructure was required to build the country. Public Sector Units were created for the speedy development as well self sufficiency of the country. Within the globalization of the world economy, the world has changed. The geographical barriers of the countries are no more a barrier for the economy. The competition, quality and economic in production is the new ethic of economy. This is the reason that developing governments of the day are going for privatization and disinvestment of the public sector units. Vicinity of those Public Sector Units are earning losses and their losses are mounting day by day. This is the main reason that government wants to disinvestment from the Public Sector Units.

Disinvestment an effective means of privatization. The money received from disinvestment of nonprofit marketing is importing primary education, providing clean water, providing basic health centers, irrigation and cheap accommodation. Disinvestment will create a sense of responsibility, accountability and competitiveness among these Public Sector Units.

The aim is to cut down the government's holding in loss making Public Sector Units to 26%. It will reduce the government borrowing to meet it's expenditure. The new management can revive the sick units with new staff and new technologies.

The left parties are against the disinvestment policy of the present government. The NDA government had a separate ministry of disinvestment. The communists do not want any disinvestment in the profit earning Public Sector Units. The case in point is the Bhatar Heavy Electricals Limited (BHEL). They have do not permitted the government even disinvestment of 10% stakes. This made discourage the foreign investors in investing money in any Public Sector Units. The communist fear that it will result in unemployment because private owners do not employ so many people. But left parties must see the realities that over rupees 23,000 crore of public money in public sector units are meager 2% as revenue.

Recommendations

To bring own government equity in all nonstrategic Public Sector Units to 26% lower, if necessary.
To restructure and revive, potentially viable Public Sector Units.
To close down lossmaking Public Sector Units.
To protect the interest of the workers.
Profit earning Public Sector Units should not be disinvested.
Professionals may head the Public Sector Units instead of bureaucrats.
The government has to maintain a balance between disinvestment and privatization.
The profit earning Public Sector Units should not be given in private hands.

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