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Privatisation and Related Issues - Coggle Diagram
Privatisation and Related Issues
Meaning of Privatisation
Private entities are tasked with the application of government plans and execution
Deregulation when a massively regulated private firm or industry becomes less organized
Privatization of the public sector companies is called Disinvestment
Migration of something from the public sector to the private sector
Objectives of Privatisation
Improving the efficiency of public sector undertakings (PSUs)
Reduce the fiscal burden on the government in maintaining PSEs
Providing strong momentum for the inflow of FDI
Ways of Privatisation
Public sale of shares
Transfer of control of enterprises
Disinvestment
Lease with a right to purchase
Transfer of ownership
Benefit of Disinvestment
Fiscal space for the relocation of resources locked with CPSEs
Monetizing locked resources
Disinvestment funds can be utilized for long-term goals
Unlocking of shareholder value
Develops and deepens the capital market through the spread of equity culture
Benefits to employees
Improves corporate governance
Is privatization a solution?
Limited success of privatization in the UK
Loss of govt monopoly
No significant difference in performance
Failure to raise funds
Privatization as a revenue source
Very slow process of profit making
Challenges
Pro capitalism
Emergence of Oligopoly
Social consequences on employees
Costly affairs
Challenge of valuation
Way forward
Limited stake sales should be considered
Success examples of Chinese PSUs
Selective PSU Reform must be considered.
PSUs with greater autonomy, with the government retaining control
Outright privatization is not a solution