Privatisation basically implies the process which leads to transfer of ownership of public sector enterprises from the government to the private sector. However, taken in a wider sense, privatisation also implies the process of granting autonomy to the public sector enterprises in decision-making and infusing the spirit of commercialisation in them.
Problems of Public Sector Undertakings in India :
1. Lack of proper planning : Public sector undertakings spend too heavily on construction as well as designing. It is primarily because there is a lack of proper planning. This lack of proper planning results in heavy drainage of funds and thus there is serious financial problem in the wake.
2. Unfavourable input-output ratio : Public sector undertakings are heavily overcapitalised with the result that there is unfavourable input-output ratio. Inadequate planning, inordinate delays in construction etc., are the causes for over capitalisation.
3. Cost of capital : At present in public sector undertakings cost of capital does not include cost of raising capital of different types and this cost is not reckoned at market price. This results in underestimating the cost of the capital. Consequently, it leads to non-realistic fixing of prices and the underestimating market trends. Even it becomes difficult to estimate the extent of profits and losses as well.
4. Problem of pricing : Another problem of a public sector undertaking is that of fixing the prices of the goods produced. As we know that unless pricing policy is sound even good concerns can run into losses. The public sector undertakings in India are facing serious financial problems as they are not following uniform pricing policy.
5. Problem of raising loans : All public sector undertakings are run with the finance of the Government. Now this has in turn raised many problems. Sometimes Government may feel it difficult to finance public sector undertakings in such cases, if these undertakings depend on capital market, they bound to disturb financial structure of the market.
