July 23,1: This is such a huge public sector giant with so many subsidiaries and lakhs of employees that nobody ever dreamed it could come first in the list of Modi privatisations. Yet that is the case.
Privatisation involves selling state-owned assets to the private sector. It is argued the private sector tends to run a business more efficiently because of the profit motive.
However, critics argue private firms can exploit their monopoly power and ignore wider social costs. Privatisation is often achieved through listing the new private company on the stock market.
In the s and s, the UK privatised many previously state-owned industries such as BP, BT, British Airways, electricity companies, gas companies and rail network.
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Arguments for and against privatisation Potential benefits of privatisation 1. Improved efficiency The main argument for privatisation is that private companies have a profit incentive to cut costs and be more efficient.
If you work for a government run industry, managers do not usually share in any profits. However, a private firm is interested in making a profit, and so it is more likely to cut costs and be efficient. Since privatisation, companies such as BT, and British Airways have shown degrees of improved efficiency and higher profitability.
Lack of political interference It is argued governments make poor economic managers. They are motivated by political pressures rather than sound economic and business sense. For example, a state enterprise may employ surplus workers which is inefficient.
The government may be reluctant to get rid of the workers because of the negative publicity involved in job losses.
Therefore, state-owned enterprises often employ too many workers increasing inefficiency. Short term view A government many think only in terms of the next election. Therefore, they may be unwilling to invest in infrastructure improvements which will benefit the firm in the long term because they are more concerned about projects that give a benefit before the election.
Shareholders It is argued that a private firm has pressure from shareholders to perform efficiently. If the firm is inefficient then the firm could be subject to a takeover.
Increased competition Often privatisation of state-owned monopolies occurs alongside deregulation — i. It is this increase in competition that can be the greatest spur to improvements in efficiency.
For example, there is now more competition in telecoms and distribution of gas and electricity. There is also very little competition within the rail industry. Government will raise revenue from the sale Selling state-owned assets to the private sector raised significant sums for the UK government in the s.
However, this is a one-off benefit. It also means we lose out on future dividends from the profits of public companies. Disadvantages of privatisation 1. Natural monopoly A natural monopoly occurs when the most efficient number of firms in an industry is one. For example, tap water has very significant fixed costs.
Therefore there is no scope for having competition amongst several firms. Therefore, in this case, privatisation would just create a private monopoly which might seek to set higher prices which exploit consumers. Therefore it is better to have a public monopoly rather than a private monopoly which can exploit the consumer.Reasons For Privatisation Of Insurance Sector In India INTRODUCTION Life Insurance is a contract between two parties, an insurer and an insured, where the insurer agrees to pay a designated amount upon the death of the insured for a premium HISTORY The history of life insurance industry dates back to year , in which the first Indian Life Insurance company, Oriental Life Insurance.
What are the Important Reasons for Privatisation in India?
is exposed, to the private sector where ever the private sector is willing and able to step in. (5) Releasing other tangible and intangible resources, such as, large manpower currently locked up in managing the PSEs, and their time and energy, for redeployment in high priority.
The Government of India liberalized the insurance sector in March , which lifted the entry restrictions for private insurance players, allowing foreign players to enter into the Indian market and start their operations in India.
Reasons For Privatisation Of Insurance Sector In India INTRODUCTION Life Insurance is a contract between two parties, an insurer and an insured, where the insurer agrees to pay a designated amount upon the death of the insured for a premium HISTORY The history of life insurance industry dates back to year , in which the first Indian Life Insurance company, Oriental Life Insurance.
Privatisation of life insurance sector in india 1. PRIVATISATION OF LIFE INSURANCE SECTOR IN INDIA PROJECT GUIDE Mr. Manish Bansal HOD-Management 2. SUBMIT TED BY Sunil Kumar REGD. 49 3. INTRODUCTION • This project is related to life insurance business in India.
A look at the arguments for and against privatisation. Privatisation involves selling state-owned assets to the private sector. It is argued the private sector tends .