6. (c) "Privatisation of Industries has not achieved its objectives." Give your critical comments.

Critical Assessment of Privatisation in India

The assertion that "Privatisation of Industries has not achieved its objectives" holds considerable weight when critically evaluating India's experience with transferring public sector undertakings (PSUs) to private hands. While the theoretical benefits of privatisation are compelling, practical implementation in India has encountered numerous challenges and often fallen short of its stated goals.

Reasons for Partial Achievement or Failure of Objectives

• Failure to Reduce Fiscal Burden Effectively: One primary objective of privatisation is to generate revenue for the government and reduce its fiscal deficit. However, the actual receipts from disinvestment have frequently fallen short of ambitious targets. For instance, in FY20, the government raised ₹50,304 crore against a target of ₹1 lakh crore. In FY25, disinvestment receipts are projected to be the lowest since 2014-15, signaling ongoing challenges in achieving revenue targets through stake sales.
• Sub-optimal Valuation and Asset Stripping: Critics argue that many PSUs have been privatised at undervalued prices, leading to a loss of valuable national assets. There have been instances where privatised entities have been accused of asset stripping, focusing on short-term gains by selling off valuable assets rather than investing in long-term growth and operational improvements.
• Creation of Private Monopolies/Oligopolies: Instead of fostering competition, privatisation, especially in sectors with high entry barriers, can lead to the creation of private monopolies or oligopolies. This can result in exploitation of consumers through higher prices and reduced service quality, as seen in some utility sectors or the consolidation in the telecom sector.
• Neglect of Social Objectives and Public Welfare: Public sector enterprises were often established with social objectives, such as regional development, employment generation, and providing essential services at affordable prices, even in unprofitable areas. Private entities, driven by profit motives, tend to neglect these social obligations, potentially leading to reduced access to services for vulnerable populations and hindering inclusive development.
• Job Losses and Employee Concerns: Privatisation often leads to workforce rationalisation, retrenchments, and altered employment terms, resulting in significant job losses and insecurity among employees. Public sector employees have historically resisted privatisation due to fears of loss of benefits and increased workload intensity, leading to political opposition and implementation delays.
• Lack of Transparency and Governance Issues: The process of privatisation has sometimes been criticised for lacking transparency, leading to allegations of corruption and favouritism in deal-making. Issues like the protracted timeline for strategic disinvestments (some cases cleared by the Union Cabinet since 2015-16 are yet to be concluded) highlight bureaucratic hurdles and governance challenges.
• Impact on Strategic Sectors: Privatising PSUs in strategic sectors (e.g., defence, energy, banking) raises concerns about national security and economic sovereignty. While the government aims for a bare minimum presence in strategic sectors, critics argue against relinquishing control over vital industries.

Arguments for Achievement of Objectives (Counter-comments)

Despite the criticisms, it is also important to acknowledge instances where privatisation has aligned with its objectives:

• Improved Efficiency and Productivity: Many privatised entities have demonstrated enhanced operational efficiency, better resource utilisation, and increased productivity due to private sector management, market-driven incentives, and reduced political interference. For example, post-privatisation, companies like VSNL (now Tata Communications) and Hindustan Zinc showed significant improvements.
• Attraction of Investment and Technology: Privatisation has often attracted crucial domestic and foreign direct investment (FDI), bringing in new capital, advanced technology, and modern management practices. This has contributed to the modernisation and expansion of industries.
• Enhanced Customer Service and Innovation: Driven by competitive pressures, privatised firms tend to be more responsive to consumer needs, leading to improved customer service, product innovation, and a wider range of choices for consumers.
• Reduction of Government Interference: Transferring ownership and management to the private sector can free PSUs from bureaucratic red-tapism and political interference, allowing for faster decision-making and more agile operations.
• Fiscal Health Improvement (in some cases): While not always consistent, successful privatisation has provided the government with much-needed revenue, which can be channelled into social welfare programs, infrastructure development, or debt reduction.

Comparative Analysis of Privatisation Impact

The impact of privatisation can vary significantly based on the sector, regulatory environment, and the specific terms of the sale.

Aspect	Public Sector (Pre-Privatisation)	Private Sector (Post-Privatisation)
Efficiency	Often low due to bureaucratic processes, lack of clear incentives, political interference.	Generally higher due to profit motive, competition, professional management.
Profitability	Many PSUs were loss-making or had sub-optimal profits, relying on government support.	Focus on profit maximisation, often leading to increased revenues and shareholder value.
Social Welfare	Prioritised social objectives, employment generation, services in remote areas.	Lesser emphasis on social objectives, focus on economically viable operations.
Investment	Limited by government budgetary constraints.	Ability to attract private capital, including FDI, for expansion and modernisation.
Competition	Often operated as monopolies, leading to less innovation.	Can foster competition, but also risks creating private monopolies without regulation.