Privatization means the transfer of managerial control of any public sector units to any private enterprises or to any private corporate body.
Benefits of Privatization:
1. Creation of Competitive Environment: It is argued that if the ownership of public sector enterprises is transferred to private sector, then the monopoly of public sector enterprises will come to an end. But in fact, it will create a competitive environment which is must for industrial development of a country.
2. Clarity of objectives: In several PSUs, there is no clarity in corporate objectives. There exists a high degree of confusion among the managers of PSUs regarding the profit objectives as well as social responsibility. Many PSUs failed on both fronts. Thus, after privatization profit becomes the foremost social responsibility of PSUs.
3. Reduction of Budgetary Deficits: There would be no question of budgetary deficit, if the PSUs yield a 10% return on investment. But in reality it is not so. The budgetary deficit have risen sharply from year to year. For instance, the budgetary deficit which was Rs. 1417 crores in 1983-84, has increased to Rs. 1,51,000 crores in 2005-06. Therefore, the Government can control its staggering budgetary deficit by using the sale proceeds on the shares in PSUs.
4. Reduction in Public Debt: Prof. Hoouer has rightly observed, “Blessed are the young for they shall inherit the national debt.” A very common dictum is, “Be not be made a beggar by banqueting upon borrowing.” The public debt has increased in astronomical proportions. “In 1950-61 public debt was of Rs. 290 crores which in 2004-05 increased to Rs. 19,86,167 crores. This rapid increase in public debt is an alarming problem and if such a increase in public debt is not drastically reduced, India will have to face economic retardation.
