PRESENTED BY :Sumitra Nandan Srivastav U.Prabir JaiswalSushant Sagar Ujjal BanerjeeSwati Bhalla Prashant KumarTavleen Virmani Tanay TulsaneyTutul Samanta Sunny RastogiVishal Kumar Raj Ashutosh Sharma

Transfer of any government function to the private sector.

Used to describe two unrelated transactions 1. buyout, by the majority owner 2. demutualization of a mutual organization

Three main methods of privatisation 1. Share issue privatisation (SIP) 2. Asset sale privatisation 3. Voucher privatisation

Merits of PrivatizationMerits of Privatization Private-run industries tend to be less bureaucratic

Increased efficiency

Specialisation

Less Corruption

Managers are accountable to stakeholders

Organized goals

Easy to raise investment capital in the financial markets

Profits tend to be dispersed and diversified

Less political influence

Better paid jobs

More risk leads to more profits

The Government is motivated to performance

improvements

Governments can raise money in the financial markets

more cheaply.

No job security

Concentration of power in few hands

More exploitation of employees

Cuts in essential services

Lack of market discipline

Public sectorPublic sectorIs a part of the state that deals with either the production, delivery and allocation of goods and services by and for the government or its citizens.

Forms of Public Sector 1. Direct administration funded through taxation 2. Publicly owned corporations 3. Partial outsourcing

SBI enjoys a monopoly of the government business.SBI was formed under the SBI Act in 1955. The government hold around 93% of the equity, leaving 7% to private ownership. By this act the equity of RBI cannot be diluted below 55%.This act was outdated and needs to be re-addressed.However, efforts were initiated by SBI to privatize itsnon – banking subsidiaries like SBI Caps, SBI Funds Management etc, where SBI’s holding is about 85% of the equity.

Why privatization of banksWhy privatization of banks

In early 80s, the Banking Sector in India wasdominated by the public sector banks whichwere characterized byHigh Intermediation CostsOver-staffing and Over-branchingHuge portfolio of Non performing LoansPoor Customer ServicesUndercapitalizedPoorly Managed / Narrow Product RangeUndue Interference in Lending, Loan Recovery& Personnel

Positive impact on bankingPositive impact on banking There was a great increase in the no. of bank branches after privatization from 8262 to 45,898.Branches in rural/semi-urban sectors increases from 2% to 40% after privatization.Credit to agriculture increases from Rs.162 crore to Rs.4,46,496 crore. More job opportunities raise after privatization which leads to increase in staff from 2,20,000 to 9,65,720.Because of credit misallocation, public sectorbanks may be a bigger threat to stability than private sector.

Negative impact on bankingNegative impact on bankingInterest rate is more in private sector banks as comparative to the public sector banks.private banks are responsible for this recession in the world & also in india. Private banks give loans to the real estate sector and many other similar sectors with the eyes closed not taking even some proper securities by these companies.There is less job security in case of private banks.Interference and manipulation by the politician and industrialist is in full swing. In some cases, bank loans were used to garner votes.Previously the public money was safeguard through Deposit Insurance corporation but now this corporation is abolished.

Insurance sectorInsurance sectorCauses for Privatization of Insurance Sector 1. low insurance penetration in India.

2. The advertising initiatives were limited to some print and electronic media advertisements.

3. The market seems to be expanding and growing 4. Break the monopoly position of public sector companies

Competitive pricing

Value for money for the customer

High service levels

Upgrading the quality of agents

Back office and front office staff

Consumer awareness and sensitive

Prompt response to the consumers’ grievances

Increase in number of jobs

Problems in the Electricity Sector in Delhi• T&D losses (Transmission and Distribution losses) increased from 7% in 1953 to over 50% in 2000. Around 18% losses are transmission losses and 32% is lost due to power theft.

• Maintenance was neglected, leading to inefficiently working equipment.

• Commercial losses of DVB increased sharply from Rs 207 crore in 1993 to Rs 1,103 crore in 2000.

The privatisation process started in February 1999Huge financial inputs are required to improve the situation in Delhi’s power sectorSteps in Privatisation• Setting up a Delhi Power Generation and Transmission Company

• Encouraging new generation in the private sector as well as in jointventures

• Setting up new power distribution companies

• Establishing an independent statutory Delhi Electric Regulatory

Commission that should be responsible for undertaking licensing

of new capacity, prescribing performance standards and fixing tariffs

Demerits of privatisationDemerits of privatisationToo many large concessions were granted to favoured bidders

The loss reduction target of 34% within five years is not ambitious enough.

tariffs are calculated on amuch higher cost price base

Problem in valuation of assets

privatisation process led to the creation of private monopolies.

With the third largest military force in the world, military expenditure in India amounted to $23.9 billion in 2006 (source SIPRI) and has grown steadily over the past years.

On 9th may, 2001, defence sector was opened for private sector

100% Indian private investment + 26% foreign participation in private arms manufacturing ventures

Railways.Railways.•State-owned railway company of India•overseen by the Ministry of Railways of the Government of India.• Railways were first introduced to India in 1853• It share a “monopoly” market.• In 1951 the systems were nationalised as one unit, becoming one of the largest networks in the world.

Impact of PrivatisationImpact of PrivatisationPros of privatisation:

1.Better connectivity and better commutation even in rural sectors.

2.Infrastructure can be improved with the private players participation

3.Customer service can be improved with the competition coming from private players

Impact of Privatisation Impact of Privatisation (contd.)(contd.)cons:

1.Need to ensure the safety of the passengers.

2.Increase in competition can also trigger fare wars.

Thank you