B.Com Ist Year Privatisation Long Short Question Answer Notes

(6) To Avail Benefits of Capitalism : Capitalism is very successful in countries like Japan, USA, Hong Kong, Singapore, Korea, Taiwan, etc. Considering the benefits of capitalism like increase in competition, increase in technological advancement, increased efficiency etc., our government has decided to adopt privatisation.

(7) To Solve Financial Crisis of Government: In 1990-91 our government was facing financial crisis and was falling short of funds to develop infrastructure. This financial crisis could be solved by selling part of government equity at remunerative prices and thereby getting funds from their sale.

Q.29. Explain the concept of Privatisation and prove its rationality by giving reasons for and against it.

Or Give arguments in favour and against of Privatisation.

Ans. Privatisation benefits the society in several ways. The arguments or advantages of privatisation can be summarised as follows:

(1) Generate Adequate Financial Resources : The privatisation of public enterprises would provide edequate financial resources to the government. It would act as a budgetary support to the government to reduce deficit in the budget and to write down the public debt.

(2) Increase Efficiency : The privatisation of public enterprises is favoured to make their working dictated by the discipline of the market mechanism instead of the indiscipline of the bureaucratic mechanism. In other words, the public enterprises should be privatised because private entrepreneurs are relatively more efficient than the bureaucrats managing these units.

(3) Full Capacity Utilisation : In India most of the pubne enterprises are running with less than their full capacity. Consequently, resources worth million of rupees remain unutilised Drivate sector may success in optimum use of resources maintaining efficiency.

(4) Improvement of Quality: The quality of services orteren hu the public sector is very pathetic. Poor maintenance of roads, poor supply of water, erratic supply of electricity, poor health care services and the like, show the malfunctioning of public sector. Privatisation would improve the quality of the services and the operational efficiency of the enterprises.

(5) Elimination of Political Interference : Political interference is very common in the decision making process of many public enterprises. There is redtapism in decision making. There is a nexus between bureaucrats and politicians. It is argued that privatisation would eliminate political interference in purely economic and commercial decisions. It would also avoid delay in decision making.

(6) Economic Democracy : The privatisation of public enterprises is needed to end monopoly of these enterprises in certain areas. In fact, not only private monopoly but public monopoly is also undesirable. The privatisation of these units would infuse competition to raise efficiency and productivity.

(7) End to Malpractices : Corruption and malpractices are quite common in PEs in India. Nepotism, promotion by political influence, bribery etc., are very common in this sector. For instance, the public sector banks are known for their scams in financial dealings. Privatisation may put an end to all these malpractices.

(8) Professionalisation of Management: The privatization public enterprises would offer a vast scope for infusing professionalisation of management and system of accountability in these enterprises.

(9) To Reduce Unnecessary Expenses: Workers of public erprises works carelessly which leads to the wastagte of sources. Moreover, the operations of these enterprises are costly due to unnecessary expenses. But private sector can control essary expenses and maintain economy in the operations.

(10) Individual Motivation : Privatisation motivate the gers to make efficiency in the operations of the enterprises so that they can earn more and more profits.

DISADVANTAGES OR CRITICISM OF PRIVATISATION STUDY NOTES

The following arguments are put forth against privatization:

(1) Imbalanced Development of Different Secte Areas : If privatisation is permitted, the backward am remain backward and these will be deprived of the infrastructure facilities. The private entrepreneurs will set u industries in those areas where they expect a high rate of retur security for their investment. This increase imbalance amon different sectors and areas.

(2) Obstacle to Planned Economic Developmen: Privatisation would become a stumbling block in achieving the goal. of planned economic development. In India, the public enterprise are supposed to be an engine of growth and the prime vehicle to build an infrastructure and industrial base for self reliance. The success of planning depends, to a great extent on the growth of public sector.

(3) Exploitation of Workers : Workers prefer the continuance of PEs. because they act as model employers. Privatisation will lead to the exploitation of workers. The exploitative tendencies of the privatised industries in respect of wages and conditions of employment will be detrimental to labour. This is not justifiable in a welfare oriented socialistic society.

(4) Concentration of Economic Power: The private sector emerges monopoly and the concentration of economic power in the hands of few. Private sector operates on the principle of maximisation of the profits which is harmful to the consumers and the society as a whole.

(5) Exploitation of Consumers : Privatisation of PEs may result in the exploitation of consumers. Privatised enterprises will operate according to market criteria, ignoring their social obligation. A nationalised industry should be privatised if the net benefits to consumers from doing so, are positive. Hence, in a country like India, privatisation is not preferred since it is not beneficial to the consumers.

(6) No Guarantee of Success : Privatisation is not a guarantee of the success of an industrial unit. Many industries in private sector are suffering from the problem of industrial sickness. These industries are facing continuous losses.

(7) No Check on Monopolies: Public enterprises have served as an instrument to check monopolies in basic service sectors and to ensure equal distribution of income and wealth. They have been providing consistent services in the areas of strategic importance to the country like nuclear plants, ordinance factories and space research which cannot positively be opened to the private sector.

(8) Effects on National Sovereignty : Privatisation direct foreign investment in the country. This resu hip of foreign institutions over local resources. This slowly e to establishment monopoly of foreign institutions in the This can adversely effrect the national sovereignty.