Home अन्य अर्थव्यवस्था Privatization of the government entities of India: Advantages & disadvantages

Privatization of the government entities of India: Advantages & disadvantages

Privatization

Privatization is a widely debated matter in India. It involves the selling of state-owned properties to the private sector. Many speculate that privatization will have a positive effect as the private sector can run a business more efficiently due to the profit motive. On the other hand, critics believe that privatization will allow private firms to exploit their monopoly power while ignoring the social well-being of the public.

Now, let’s have a look at some of the positive and negative aspects of privatization to have a clear idea about the entirety of the scenario.

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Advantages

  • The public sector usually doesn’t have any significant incentive plan, to begin with. However, private companies, on the other hand, have much advanced and well-managed incentive programs for their employees, based on the performance. Such ideas often act as the driving force for healthy competition among the employees, eventually increasing the company’s efficiency in the market.
  • Political factors have a lot of influences and adverse effects on a public company. However, privatization of those government sectors will eliminate the possibilities of political interference while taking economically beneficial decisions for the organization.
  • Privatization will ensure that the companies have long-term goals and have plans for the best interest of the company instead of political favor-based processes that have infested the public sector.
  • Increased competition in the market and benefits for the consumers. It will eventually lead to the efficient performance of the Indian economy.

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Disadvantages

Everything is bound to have drawbacks and privatization is not devoid of that either.

  • Privatization will create natural monopolies, especially in sectors like water resources and rail companies will have a huge potential for abusive monopoly power. These parts of the public property require government regulation and privatization will eventually prove to be harmful in these cases. For instance, many owners will eventually raise the prices of these services and exploit the consumers subsequently.
  • For sectors like healthcare, education, public transport, etc, profit shouldn’t be the first priority. These public sectors are meant for the best interest of the public. Privatization can prove to be harmful here as the profit motive will reduce the priority of the public interest. It will create a lot of hassle for the general public.
  • The high dividends earned by the companies will not be received by the government. Instead, the shareholders will collect the profits due to privatization.

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