PRESENTED BY :

Sumitra Nandan Srivastav U.Prabir Jaiswal

Sushant Sagar Ujjal Banerjee
Swati Bhalla Prashant Kumar
Tavleen Virmani Tanay Tulsaney
Tutul Samanta Sunny Rastogi
Vishal Kumar Raj Ashutosh Sharma
 Transfer of any government function to the
private sector.

 Used to describe two unrelated transactions

1. buyout, by the majority owner
2. demutualization of a mutual organization

 Three main methods of privatisation

1. Share issue privatisation (SIP)
2. Asset sale privatisation
3. Voucher privatisation
 Merits of Privatization
Private-run industries tend to be less bureaucratic
Increased efficiency
Specialisation
Less Corruption
Managers are accountable to stakeholders
Organized goals
Easy to raise investment capital in the financial markets
Profits tend to be dispersed and diversified
Less political influence
Better paid jobs
More risk leads to more profits
The Government is motivated to performance
improvements
Governments can raise money in the financial markets
more cheaply.
No job security
Concentration of power in few hands
More exploitation of employees
Cuts in essential services
Lack of market discipline
 Public sector
Is a part of the state that deals with either the
production, delivery and allocation of goods and
services by and for the government or its citizens.

 Forms of Public Sector

1. Direct administration funded through taxation
2. Publicly owned corporations
3. Partial outsourcing
SBI enjoys a monopoly of the government business.
SBI was formed under the SBI Act in 1955. The
government hold around 93% of the equity, leaving 7%
to private ownership. By this act the equity of RBI
cannot be diluted below 55%.
This act was outdated and needs to be re-addressed.
However, efforts were initiated by SBI to privatize its
non – banking subsidiaries like SBI Caps, SBI Funds
Management etc, where SBI’s holding is about 85% of
the equity.
 Why privatization of banks
In early 80s, the Banking Sector in India was
dominated by the public sector banks which
were characterized by
High Intermediation Costs
Over-staffing and Over-branching
Huge portfolio of Non performing Loans
Poor Customer Services
Undercapitalized
Poorly Managed / Narrow Product Range
Undue Interference in Lending, Loan Recovery
& Personnel
 Positive impact on banking
 There was a great increase in the no. of bank branches
after privatization from 8262 to 45,898.
Branches in rural/semi-urban sectors increases from
2% to 40% after privatization.
Credit to agriculture increases from Rs.162 crore to
Rs.4,46,496 crore.
 More job opportunities raise after privatization which
leads to increase in staff from 2,20,000 to 9,65,720.
Because of credit misallocation, public sector
banks may be a bigger threat to stability than private
sector.
 Negative impact on banking
Interest rate is more in private sector banks as
comparative to the public sector banks.
private banks are responsible for this recession in the
world & also in india.
 Private banks give loans to the real estate sector and
many other similar sectors with the eyes closed not taking
even some proper securities by these companies.
There is less job security in case of private banks.
Interference and manipulation by the politician and
industrialist is in full swing. In some cases, bank loans
were used to garner votes.
Previously the public money was safeguard through
Deposit Insurance corporation but now this corporation is
abolished.
 Insurance sector
Causes for Privatization of Insurance Sector
1. low insurance penetration in India.

2. The advertising initiatives were limited to some

print and electronic media advertisements.

3. The market seems to be expanding and growing

4. Break the monopoly position of public sector

companies
 Competitive pricing

 Value for money for the customer

 High service levels

 Upgrading the quality of agents

 Back office and front office staff

 Consumer awareness and sensitive

 Prompt response to the consumers’ grievances

 Increase in number of jobs

Problems in the Electricity Sector in Delhi
• T&D losses (Transmission and Distribution losses)
increased from 7% in 1953 to over 50% in 2000. Around
18% losses are transmission losses and 32% is lost due to
power theft.

• Maintenance was neglected, leading to inefficiently

working equipment.

• Commercial losses of DVB increased sharply from Rs

207 crore in 1993 to Rs 1,103 crore in 2000.
The privatisation process started in February 1999
Huge financial inputs are required to improve the
situation in Delhi’s power sector
Steps in Privatisation
• Setting up a Delhi Power Generation and Transmission Company
• Encouraging new generation in the private sector as well as in
jointventures
• Setting up new power distribution companies
• Establishing an independent statutory Delhi Electric Regulatory
Commission that should be responsible for undertaking licensing
of new capacity, prescribing performance standards and fixing
tariffs
 Demerits of privatisation
Too many large concessions were granted to favoured
bidders

 The loss reduction target of 34% within five years is

not ambitious enough.

 tariffs are calculated on amuch higher cost price base

 Problem in valuation of assets

privatisation process led to the creation of private

monopolies.
With the third largest military force in the world,
military expenditure in India amounted to $23.9 billion in
2006 (source SIPRI) and has grown steadily over the past
years.

On 9th may, 2001, defence sector was opened for

private sector

100% Indian private investment + 26% foreign

participation in private arms manufacturing ventures
 Railways.
•State-owned railway company of India
•overseen by the Ministry of Railways of
the Government of India.
• Railways were first introduced to India in
1853
• It share a “monopoly” market.
• In 1951 the systems were nationalised as one
unit, becoming one of the largest networks in
the world.
 Impact of Privatisation
Pros of privatisation:

1.Better connectivity and better commutation even in

rural sectors.

2.Infrastructure can be improved with the private

players participation

3.Customer service can be improved with the

competition coming from private players
Impact of Privatisation (contd.)
cons:

1.Need to ensure the safety of the passengers.

2.Increase in competition can also trigger fare wars.

Thank you