Privatization, the 13-letter politically combustible phrase,refers to the transfer of ownership, property or business from the government to the private sector. So when the government sells more than 50% of its equity shares to the public, that PSU (Public Sector Undertaking) is called privatized.
- Impact of privatization on economy
- How people will react to it
- What will happen to GDP
- Effect on cash flow in market
- Who will be benefited
- Thinking about poor community
- Strategic and non-strategic field
- Role of covid
Now let’s see some of the merits and demerits of PSU privatization to figure out if the verdict is in favour or not.
PSUs in the first decade of 2000 were quite profitable. Then they started issuing more and more stocks which reduced its market interest. Now even in the bullish stock market where the NIFTY has a P/E ( i.e. price to earning ratio) of approximately 29, the major PSUs have a P/E ratio in the range of 5-8 .But after the sale of Air India the PSUs are being revalued by the firms and they see more profitability once more and more PSUs get privatized.
AGAINST OF MOTION:
Does privatization bring laurels to us or are we just selling family’s silver? In the name of privatization, the government is selling off state assets (owned by everyone) to a wealthier subset of the population , thereby increasing the gap between rich and poor. PSUs work for the public interests whereas private companies work for themselves. No private sector will be interested in opening banks in villages. So what about those people? During Covid-19 pandemic many employees were fired. Private companies are not reliable when we talk of job security.
Adding further, India is not a rich country. 68.8% of the Indian population lives on less than $2 a day. They prefer government hospitals,dispensaries,schools and public mode of transportation over high end services.According to the survey conducted by National Statistical Office (NSO) ,42% of the population rush to public hospitals for in-patient hospitalisation.Today railway is the cheapest mode of transportation. If all these will be privatized there will be a monopoly of some affluent people and they will take advantage and charge high prices knowing that the consumers will have no choice left but to do so.
THE BOTTOM LINE:
As the name suggests,’public’ sectors aim to serve the public or the “common man”.However the advantages that the PPP(Public-Private Partnership) model serves for the government and the citizens cannot be neglected. Many believe that privatization can be accepted as long as it does not violate the public interests. But then again, is this even possible? The subject is up for debate. Hopefully this blog gave you enough insight to make a judgement.