Bhaskar 360: From bread to warship, the government opened the market for such private companies


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Bhaskar Research15 hours ago

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Prime Minister Narendra Modi, in a program on 24 February, strongly advocated the privatization of public sector undertakings, saying that doing business is not the government’s job. The private sector brings with it investment, excellent management and modernization. Earlier, during the motion of thanks on the President’s address to the Lok Sabha on 10 February, the Prime Minister also talked about the role of the private sector in the development of the country. In fact, the government wants to raise Rs 1.75 lakh crore in FY 2021-22 through disinvestment and privatization.

The private sector advocacy by Prime Minister Narendra Modi is being linked to this. However, the government’s efforts in this direction are moving very slowly.

The Central Government has extended the time limit for disinvestment of Bharat Petroleum Corporation Limited several times and the same is the case with the sale of stake in Air India. The government is attempting reforms to increase investment in eight core areas. This includes foreign direct investment in the defense sector, privatization of airports, opening of space and nuclear agencies to the private sector. Experts believe that the government is trying to bring back the deteriorated economic situation of the country with the money received from large disinvestment.

The government intends to complete disinvestment this year in other companies including Shipping Corporation of India (SCI), Container Corporation of India, IDBI Bank, Bharat Earth Movers Limited, Pawan Hans and Nilanchal Ispat Nigam. The government has identified 100 PSUs for disinvestment. The special thing is that the government also wants to launch an IPO of LIC in which 10% stake of LIC can be sold. According to experts, this may be the largest IPO in the country. According to the Economic Survey, the government had targeted to raise Rs 2.1 lakh crore from disinvestment in the last financial year as well, but only Rs 15,000 crore was disinvested.

Understand the journey of disinvestment and privatization of the last 30 years in the country from four important points

1. When did large-scale privatization start in the country?

For the first time in the Industrial Policy of 24 July 1991, it was said that disinvestment in the government’s equity stake in select undertakings. On 20 November 1991, it was announced that the government would sell shares of 31 public sector undertakings.

In 1992-93, open bidding was allowed for the shares of the undertakings. The bidding in the first year was allowed only to insurance companies, mutual funds and banks, but the sale could not take place.

Starting in the year 1991-92, the government’s shares in 39 PSUs were disinvested in 14 rounds by 2000. The government received a total amount of about Rs 18,288 crore from this.

2 Which big companies have been privatized so far?

The Ministry of Disinvestment formed in the Atal Bihari Vajpayee government in 1999 under the leadership of Vaipayee was sold to state-owned companies such as Bharat Aluminum Company (Balco), Hindustan Zinc, Indian Petrochemicals Corporation Limited and Videsh Sanchar Nigam Limited. Several other companies were also strategically disinvested from time to time. Some of them were wholly sold by governments in certain companies. Such as CMC Limited, Hotel Corporation of India Limited, HTL Limited, IBP Corporation Limited, India Tourism Development Corporation Limited, Lagan Jute Machinery Corporation Limited, Maruti Suzuki India, Tata Communication Limited. etc.

3 In which areas did private companies get permission?

Banking: In 1993, the Reserve Bank allowed 13 new domestic banks to carry out banking activities.

Telecom: Prior to 1991, BSNL had a monopoly. Private companies came in 1999 after the new telecom policy came into force.

Insurance: After the Life Insurance Act in 1956, Life Insurance Corporation of India was established on 1 September 1956. The private sector got permission in 1999 following the recommendations of the Malhotra Committee.

Aviation: In 1992, the government formulated an open sky policy and companies like ModiLuft, Damania Airways, Air Sahara came.

Broadcast: It was Doordarshan until 1991. In 1992, the first private channel GTV started. Today there are more than 1000 channels in the country.

4 Who raised how much money annually from disinvestment?

There is a huge difference in the average amount raised annually from disinvestment in BJP and Congress led governments. The average yield of the BJP-led government from disinvestment is almost three times that of the Congress-led government. Liberalization of the country started in 1991 during Manmehan Singh’s government and the BJP took it fast. While in opposition, these two parties have been opposing each other’s economic policies. The BJP-led governments have garnered nearly 30 thousand crores from disinvestment, while Congress-led governments have raised Rs 8,274 crore.

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