articles on privitisation

8/9/2019 Articles on Privitisation

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http://kautilya.chhabra-inc.com/node/30

The role of private sector in India

Posted On: August 13, 2006 - 12:33pm by kautilya

I love this article about how in all areas in India that were traditionally controlled by thegovernment, and now opened to the private sector we see massive improvement. Also,the single area which government should have been playing a good role at, i.e. law, thegovernment has been a dismal failure. He almost says that even law should be privatized,but stops short.This is the article and some selected quotes fomr the article below:

The private sector has done more than expected. India's software industry is world class.Indian manufacturing has finally become competitive: exports have grown by over30%

annually for three years. Indian companies are making foreign acquisitions galore andbecoming MNCs - Tata Steel, Bharat Forge, Tata Motors and Ranbaxy are a fewexamples.

Power was long a state monopoly, and state electricity boards were bankrupt whenreforms began in 1991. They sought refuge in independent power producers like Enron,but these degenerated into a fiasco. How then did India produce enough power for recordeconomic growth? Well, old power stations improved their load factor. But the mainreason is that corporations decided they could not rely on government supplies, and set up20,000 MW of captive power.

The second green revolution is being energised by the private sector , not the publicsector. Reliance has led the charge into rural areas in Punjab with a farm-to-fork operation

- managing the chain from seeds and crops to processing and hypermarket sales. ITC israpidly expanding its e-choupals, computerised kiosks for farm information and forbuying produce. The Mahindras, Tatas and Shrirams are setting up rural supermarkets.

The government developed the idea of deficiency payments for roads, with the contractgoing to the bidder requiring the lowest toll subsidy. But now some bidders are

willing to pay a fee rather than demand subsidies

http://www.ieo.org/sid002.html
http://kautilya.chhabra-inc.com/node/30http://economictimes.indiatimes.com/articleshow/1890518.cmshttp://www.ieo.org/sid002.htmlhttp://kautilya.chhabra-inc.com/node/30http://economictimes.indiatimes.com/articleshow/1890518.cmshttp://www.ieo.org/sid002.html


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IN DEPTH: Indian Insurance Sector

Finally, the Indian Insurance Sector May Go Global

Insurance has always been a politically sensitive subject in India.After 40 years of government protectionism of this massivesector, the new United Front government is touchingdangerous yet interesting ground with their intentions ofopening this sector to private Indian business houses, as wellas international players.

Insurance has always been a politically sensitive subject in India. Within less than 10years of independence, the Indian government nationalized private insurancecompanies in 1956 to bring this vital sector under government control to raise much

needed development funds.

Since then, state-owned insurance companies have grown intomonoliths, lumbering and often inefficient but the onlyalternative. They have been criticized for their huge bureaucracies,but still have millions of policy holders as there is no alternative.

Any attempt to even suggest letting private players into this vitalsector has met with resistance and agitation from the powerfulinsurance employees unions. The Narasimha Rao government

(1991-96) which unleashed liberal changes in India's rigid economic structure could nothandle this political hot potato. Ironically, it is the coalition government in power todaywhich has declared its intention of opening up insurance to the private sector. Ironicalbecause this government is at the mercy of support from the left groups which have beenthe most vociferous opponents of any such move.

No policy initiatives have yet been announced, but the governmenthas already clarified it will not privatize the existing insurancecompanies. But while the decision has been welcomed by the bigcompanies who were planning to make a foray into this lucrativebusiness, the move has been criticized by trade unions and evensome left supporters of the government.

In some ways it was inevitable-all segments of the financialsector had been opened to private players and it was only a matter of time beforeinsurance followed. The bigger private players claim that opening up insurance will givepolicy holders better products and service;the opponents of privatization argue thatin a poor country like India insurance needs to have social objectives and

newcomers will not have that commitment.

Many international players are eyeing the vast potential of the Indian market and are
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already making plans to come in. But it will take some time before the intent translatesinto policy-the unions are not going to give up without a fight and in that they will get thesupport of some elements of the coalition government.

Sidharth Bhatia is a senior Indian journalist who runs a well known television program

on Indian business and current affairs. A former newspaper editor and foreign

correspondent, Bhatia has written for several publications in India and abroad.

http://www.pppinindia.com/sector-airports.asp

Airportshome

Size

Of a total number of 454 airports and airstrips in India, 16 are designated as internationalairports. The Airports Authority of India (AAI) owns and operates 97 airports. A recentreport by Centre for Asia Pacific Aviation (CAPA), Over the next 12 years, India's CivilAviation Ministry aims at 500 operational airports. The Government aims to attractprivate investment in aviation infrastructure. India has been witnessing a very strong

phase of development in the past few months. Many domestic as well as internationalplayers are showing interest in the growth and development of the aviation sector withimmense focus on the development of the airports. Indian private airlines Jet,Sahara, Kingfisher, Deccan, Spicejet - account for around 60% of the domestic

passenger traffic. Some have now started international flights. For the next years tocome India is poised with strong focus on the development of its airport to meet theinternational standards. The government is planning modernization of the airports toestablish a standard. The newly developed airports will help releasing pressure on theexisting airport in the country.

Plans

A projected investment of USD 8.5 billion has been planned for the development ofIndian airports during the 11th plan. Mumbai and Delhi airports have already beenprivatized. These two airport are being upgraded at an estimated investment of US$ 4billion for the period 2006-16. Development of airport infrastructure is a focus area forthe Government. There has been a significant uptrend in domestic and international airtravel.

AAI has planned a heavy investment of USD 3.07 billion over the next five years. Out ofit 43 per cent will be for the three metro airports in Kolkata, Chennai and Trivandrum.

The rest will be invested in upgrading other non-metro airports and in the modernizationof the existing aeronautical facilities.

Passenger traffic is projected to grow at a CAGR of over 15% in the next 5 years.It is estimated that the data will cross 100 million passengers per annum by 2010

Cargo traffic to grow at over 20% per annum. over the next five years, crossing3.3 million tonnes by 2010

Major investments planned in new airports and up gradation of existing airports
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100% FDI is permissible for existing airports; FIPB approval required for FDIbeyond 74%.

100% FDI under automatic route is permissible for greenfield airports. 49% FDI is permissible in domestic airlines under the automatic route, but not by

foreign airline companies. 100% equity ownership by Non Resident Indians (NRIs) is permitted. AAI Act amended to provide legal framework for airport privatization. 100% tax exemption for airport projects for a period of 10 years. Open Sky Policy of the Government and rapid air traffic growth have resulted in

the entry of several new privately owned airlines and increased frequency/flightsfor international airlines.

Initiatives

The Committee on Infrastructure has initiated several policy measures that would ensuretime-bound creation of world-class airports in India. A comprehensive civil aviationpolicy is on the anvil. An independent Airports Economic Regulatory Authority Bill foreconomic regulation is also under consideration.

The policy of open skies introduced some time ago has already provided apowerful spurt in traffic growth that has exceeded 20% per annum during the pasttwo years.

Major airports such as Chennai and Kolkata are also proposed to be taken up formodernization through the PPP route.

To ensure balanced airport development around the country, a comprehensiveplan for the development of other 35 non-metro airports is also under preparation.These measures are expected to bring a total investment of Rs. 40,000 crore (USD8.312 billion) for modernization of the airport infrastructure.

A Model Concession Agreement is also being developed for standardizing andsimplifying the PPP transactions for airports, on the analogy of the highways

sector. This would include upgrading of the ATC services at the airports. Issues relating

to customs, immigration and security are also being resolved in a manner thatenhances the efficiency of airport usage.

A greenfield airport is already operational at Bangalore and the one at Hyderabad,built by private consortia at a total investment of over USD 800 million, will beoperational soon.

A second greenfield airport being planned at Navi Mumbai is planned to bedeveloped using public-private partnership (PPP) mode at an estimated cost ofUSD 2.5 billion.

35 other city airports are proposed to be upgraded through PPP mode where an

investment of USD 357 million is being considered over the next three years.

Potential

High demand for investments in aviation infrastructure. Favorable demographics and rapid economic growth point to a continued boom in

domestic passenger traffic and international outbound traffic.


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Greenfield airport projects planned in resort destinations and emerging metrossuch as Goa, Pune, Navi Mumbai, Greater Noida and Kannur.

International inbound traffic will also grow rapidly with increasing investmentand trade activity and as Indias rich heritage and natural beauty are marketed tointernational leisure travelers.

Modernisation / upgradation of metro airports induction of partners for Chennai,Kolkata expected subsequently

SME lending, a largely untapped market, presents a significant opportunity. Thisaccounts for 40% of the industrial output and 35% of direct exports.

Airport Statistics 2006-07

Airport Average no. of Passengers (Per Day)

Mumbai 20128

Delhi 18228

Chennai 7934

Bangalore 3455

Hyderabad 3327

Kolkata 2206

Source: Director General of Civil Aviation, AAI

Opportunity

There has been a significant uptrend in domesticand international air travel

Outlook

Passenger traffic is projected to grow at a CAGR of over 15% in the next 5 yearso To cross 100 million passengers p.a. by 2010

Cargo traffic to grow at over 20% p.a. over the next five years

o To cross 3.3 million tonnes by 2010


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Major investments planned in new airports and upgradation of existing airports

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