be privatisation liberal is at ion

8/14/2019 BE Privatisation Liberal is at Ion

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Business Environment(BE)MGT511

Keshri Nandan

Chaudhary+91 9501445120


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Major Problems faced

by India Low NNP

Chronic unemployment

Low per capita income

Considerable % of population underpoverty line

Marginal exports High level of imports


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Major Problems faced

by India Increasing trade deficits

Decline of foreign exchange reserves

Poor external economic image Low level of technological base

Insignificant innovations

Mounting foreign debts


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Measures taken up to

solve these problems New Industrial Policy

Removal of Import Restrictions

Relief to foreign investors FERA and MRTP Relaxation

Privatization of Public Sector

Simplification of Industrial Licensing

Encouraging Foreign Tie-ups


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Measures taken up to

solve these problems Banking and financial Reforms

New trade policy


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Rationale for

Privatisation Economic inefficiencies-

high cost of productions

inability to innovatecostly delays in delivery of goods and services


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Rationale for

Privatisation To strengthen competition and efficiency

To fund infrastructure growth

To reduce unnecessary interferences More disciplined labour forces


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PRIVATISATION Privatisation means a change in ownership

resulting in a change in management

Disinvestment means dilution of the stake ofthe government . Change in management isnot a necessary condition in disinvestment


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PRIVATISATION No. of Industries reserved for Public sector in India 17(1956)

No. of Industries reserved for Public sector in India 8(1991)

No. of Industries reserved for Public sector in India 6(1993)

No. of Industries reserved for Public sector in India 3(Now)


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PRIVATISATION Sale of enterprise

Leasing

Joint Ventures

Public Share offers


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Problems with

Privatisation Ownership to a privileged few

lack of social responsibility

Loss of experienced managerialexpertise


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Disinvestment- Methods Strategic sale

Initial public offers through capital

market (domestic market) Issues of ADRs / EDRs


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Disinvestment- (Strategic

Sale) Proposal for disinvestment placed for consideration of

Cabinet Committee on Disinvestment (CCD). Then

Expression of Interest Call for. Shortlisting of bidders,

Due Diligence of PSU by bidders. Bid received are again

placed before CCD for final decision.

Ex: Sale of 51% stake in BALCO to Sterlite Industries


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Sale) Proposal for disinvestment placed for consideration of

Cabinet Committee on Disinvestment (CCD). Then

Expression of Interest Call for. Shortlisting of bidders,

Due Diligence of PSU by bidders. Bid received are again

placed before CCD for final decision.

Ex: Sale of 51% stake in BALCO to Sterlite Industries


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Sale) 25% equity out of Govts 53% stake in VSNL

to M/S Panatone (Tata Group) Feb 2002

26% equity in IPCL (out of 60% Govt.stake) to Reliance Group (May 2002)


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Disinvestment- (IPOs,

ADRs etc) Global Depository Receipt Issue (ex: VSNL during 1996-97

and 97-98)

Domestic Offering of shares (ex: GAIL in 1998-99)through Capital Market. (IPO)

Other IPOs are ONGC (10%), Maruti (27.5%) in 2003-04.


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Measures taken up for

Liberalisation Relief to foreign investors

Devaluation of Indian Rupees

New Industrial Policy PSUs disinvestment

Changed Licensing procedures


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Measures taken up for

Liberalisation New Trade Policy

Streamlining licensing system

Changed Licensing procedures Incentives was also provided for 100%

export units and processing zones (SEZs)

Quota Restrictions removal

be privatisation liberal is at ion

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