Privatization

Introduction

In basic terms, privatization means the transfer of ownership, property, or business from the government to the private sector. It also describes the things in which the company is already in private security, but now has become less regulated through the process of deregulation. It also means when a private party has been regulated by the programs and schemes of the government. In this the company doesn’t need to be in the public sector, it might also be possible that the company which privately performs public functions.

In 1991 India has made a major change in the policy of economic ideologies. During that time our finance minister Mr. Man Mohan Singh made some major economic changes. Just because of the economic crisis, the finance minister makes changes in the economic policy. So, they made changes in the fiscal policy and devalued the price of money by 20% for making the trade competitive. The idea of privatization may also lead to the reduction of interference of government in the activities of the company. It also gives private companies the to participate in economic competition democratically.

The government with the help of privatization wants to increase the financial strength of the country through the inflow of FDI (Foreign direct investment). They also wanted to improve the efficiency of the public sector. They wanted to increase the competition in the market, by which both public and private sectors give their best which leads to the development of the country. With its help of it, the government wanted to diversify the market opportunities.

So, the demand and supply of goods will take place as per the needs of the market and leads to an increase in revenue. They even wanted to make the environment ready for rapid industrialization. This also leads to foreign investment opportunities. There are various ways through which privatization can occur:[1]

• By the withdrawal of the government from the ownership and management of public Sector companies.
• By the outright sale of public sector companies.
• Public sale of shares
• Public auction
• Public tender
• Direct negotiations
• Transfer of control of enterprises that were controlled by the state or by municipalities.
• Lease with a right to purchase

There are various reasons for India to be privatized in various fields. among them, the most prominent one is providing a better quality of service at a cheap rate. Being privatized productivity also enhances because the private company is more profit-oriented than the government. Being privatized will remove the political interference which was made earlier in the government-owned subsidiary and reduce the chances of corruption.

Being privatized the competition between the companies increases and the quality of goods becomes better. Being privatized doesn’t means that the government has no control over the company’s decisions. The government can easily introduce a policy in which every company has to seek permission from the government before making any decision.

Privatization leads to the separation of one giant company into smaller ones which will enhance the quality and they will look after even a small problem that the public might face and find a suitable solution to it.  So, for all these things to be accomplished it is much needed that privatization should be done in the fields of healthcare, railways, and many more.

Privatization In Healthcare

Privatization in the field of healthcare means the involvement of the private sector in healthcare services. The transfer and functions to the private sector. this was the question of matter that will the privatization of health care will succeed or not. But even after facing so many issues and problems privatization in health care services was found to be successful in multiple dimensions.

The efficiency of the public sector in the field of healthcare was very weak, so it become important to make healthcare services in the hand of the private sector along with the public. For maintaining the healthcare services in India, it is highly required for making the healthcare services privatized. With the increase in the upcoming diseases with time, it is not possible for public sector services. The public sector gets the money from the government, so even if they are penniless then also, they can’t refuse the patient from giving them proper treatment. On other hand, the private sector has the right to say no to patients for treatment.

In India, more than 40% of the healthcare sector is not equipped with basic facilities like water supply, availability of medication, electricity supply, adequate emergency treatments in emergency rooms, ample number of doctors, and so on.[2] This clearly shows that privatization in the field of healthcare is too much needed.

This increases the gap between rich and poor people, which means with the increase in the price of medical facilities only rich people can survive. Privatization in healthcare facilities has helped India not only in the economy of the country. But, also gaining a reputation in the international market

Privatization Of Healthcare A Boom For The Country Economy

The Indian healthcare industry includes various service providers like doctors, nurses, and hospitals. They deliver remedial and diagnostic services to the citizen of India. The Indian healthcare market is anticipated to grow to 372 billion USD. Because of rising earnings, increased healthcare awareness, easier access to insurance, and an increase in the prevalence of lifestyle diseases, this sector’s economic contribution is anticipated to increase.

The Indian hospital industry is growing at a rate of 16-17 percent and is expected to reach 6.2 trillion in 2022. The number of healthcare facilities and skilled doctors has risen in the last five years. For better development, the government of India launched the world’s largest healthcare scheme called Ayushman Bharat in 2018. Under this, every person who is below the poverty line may get 5 lack rupees for health cover.

The private sector played a predominant role in the economy not only by gaining income but, also helped India to gain a national and international reputation. The increase in healthcare spending by the Indian government may lead to an increase of three percent in the GDP in the last year.

Till now, more than 50 lakh people have gained treatment under the Ayushman Bharat scheme. With this scheme, the government is going to generate employment of 11 lakhs in the upcoming years. The Indian healthcare wearable industry is growing at a rate of 75 to 100 percent each year and is contributing nearly USD 1923 million in revenue to the economy. We all knew the situation of the pandemic if during that time the privatization of healthcare was not there.

Then it might become very tough for India to recover from the situation. During that time the medical facilities played a very crucial role in making the vaccine of covid which helps India’s economy and because of this India has gained a lot of international reputation. There are various benefits of getting privatized in healthcare like every patient has the flexibility of fixing a doctor’s appointment. Earlier the doctor and patient ratio are very low, but with the help of privatization, the ratio can be made better. As we all know that the thing which has quality may have a higher price.

So that’s why some of the treatments in private hospitals are expensive also. In this regard also the government has taken a few initiatives, like a central government health scheme offering free treatment to cancer patients in any hospital they wanted. With the help of privatization, the government hospital has got support from private hospitals. The scenario of covid 19 was the best example for understanding it. But everything which gets succeed has to go through various challenges.

Privatization In Railways

 Indian railway is the world’s 8^th largest employer. It has approximately 1.3 million employees. Ministry of Railways has kick-started the process to allow private players to operate certain trains on its network by inviting Request for Qualifications (RFQ) for the operation of passenger train services on over 100 routes with 150 modern trains. The project will bring private sector investment of about Rs. 30,000 crores. This means giving private companies equal opportunities to run their trains in the country and whose expenses will also be taken care of by that company.

The price of private trains is competitive compared to the other modes of transportation like airways, and buses. So, the consumer should think before booking giving the fairs. Only 5% of trains are run by private companies, still, 95% of trains are run by the Indian railways. The decision of the government of giving 50 trains and 150 stations to private companies shows that Indian railways are also trying to get privatized.

Teja’s Express is one of the most successful private trains in India. Privatization in this field will also lead to an increase in the economy and the reputation of India at the international level. The citizens of India who do not prefer to use the train for transportation, will now also use the train and which leads to a raise in income and hence leads to a rise in the economy of the country.

There are various reasons why the railways are getting privatized which are as follows:

• Indian Railways as a public sector enterprise (PSE) is a regular loss-making body.
• Basic amenities like cleanliness, ticket booking, etc. are in a poor state of affairs.
• Modernization of railways has been lagging far behind.
• The increasing number of rail accidents.
• Punctuality of trains is also a big issue.

Privatization is helping the Indian railways in coming out of the loss of making cycle. with help of it, all the drawbacks of railways will be removed. Privatization of railways has benefits like improved efficiency, services, operations, etc. At the same time, it has disadvantages like it can’t provide affordable services, formalization of jobs, revenue loss to the government in the form of a dividend, etc. the privatization in the field of railways will bring competition and passengers will get the service for which they are paying, and not getting it earlier.

The Need For The Privatization Of Indian Railways

• Low quality of services, goods, catering, and punctuality: Indian railway has the responsibility for maintaining the railway network of the world’s biggest democracy due to which the quality of services, goods, and catering get suffers.
• Low internal revenue: because of cross-subsidization revenue has not been generated at an optimum level.
• Increasing no. of questions: The increasing number of train accidents has raised questions about the government’s efficiency in maintaining railways.
• Increasing expenditures: Indian railways are growing continuously and the government has made a large investment in it, so people have large expectations from it.

 With the help of privatization, sanitization and hygiene in the washroom of the train have been improved, and even the increase in competition may lead to a reduction in the fare price. With the help of privatization, they started using better technology. I think that the privatization of railways was a very good step for reducing the pressure on the Indian railways. This privatization of railways is helping in the development of the Indian railways and the use of new technology and reducing the risk of accidents.

Impact Of Privatization On The Indian Economy

The entrepreneurial role is encouraged in the private sector because of the freedom to make independent decisions for the enterprise. You are not under pressure from the government. Before 1991, when there was no privatization of the economy, state-owned industries had difficulty authorizing funds for the economy. Governments usually delay sanctioning funds. This is because the government manages administration in a very cumbersome and complicated way and slows down the inflow of funds. Before 1991, state spending exceeded revenue.

As a result, the government faced a budget deficit. This further increased the financial burden on the government. Private companies lead to the influx of foreign direct investment into the country. Due to India’s broad market and consumer base, there is increasing consumer demand for foreign products. People around the world are investing money in these companies as more and more companies are privatized.

With the privatization of companies, the regular inflow of funds is increasing. This is because private companies do not need a permit to determine the financial status of the economy. This financial burden on the government was greatly reduced when the country was privatized. Private sector companies do not spend large sums of money on non-development sectors, unlike government sector companies.

By earning more income, private companies also helped the government pay taxes. With systematic and structured management, private companies are known for satisfying the inexhaustible desires of consumers. Therefore, product diversification is progressing. Buyers have a wide range of choices in the market. Private companies focus on increasing operational efficiency so that they can meet their targets on time or even before deadlines. This allows you to avoid unnecessary procedures. 

Conclusions

 In India, privatization is a critical step towards sound government and rapid economic development. Due to the pandemic, the government is now more accountable for steering the privatization process correctly and achieving positive results. Additionally, the privatization process improves economic standing. Even though they have helped the country flourish, public sector organizations nonetheless have many flaws.

The requirement for privatization will improve economic standing. PSUs have helped the country flourish, yet they still have several shortcomings. To increase efficiency, the government should implement full and partial privatization. Social justice, however, is also important and cannot be overlooked while reforms are being implemented. However, social fairness is also crucial and must not be disregarded when implementing reforms. With the upcoming time, our country should be getting privatized in various fields.

[1] Privatisation: Meaning, Objectives, Methods, Advantage, Example. (n.d.). BYJUS. Retrieved February 7, 2023, from https://byjus.com/commerce/privatisation/#:~:text=However%2C%20there%20are%20six%20methods%20of%20privatisation.%20Public

‌[2] Public vs Private Healthcare in India: All You Need to Know. (2018). Impactguru.com. https://www.impactguru.com/blog/public-vs-private-healthcare-in-india-the-difference-pros-and-cons

‌

By: Lakshyadeep Verma, a 1st-year law student at UPES.