Disinvestment - A New Way Out | Disinvestment in India - Is it Good or Bad ?| TopFiveInvestments.com

Disinvestment Speech Disinvestment of public sector enterprises has been one of the agenda of present government. But the debate continues, with some enthusiastically endorsing it and others expressing apprehensions and opposition. By and large, this debate has been at the ideological level. Ideology cannot be kept out of the debate, but disinvestment has other dimensions too. The modalities of disinvestment are important. So are its consequences. I present here my view of disinvestment and how can both public sector and private sector enterprises may co-exist and play their role to build this nation.

History - After independence, public sector enterprise was the only option in capital intensive industry as private sector was not big enough to finance those project. So, power, aviation, telecommunication, construction and all major infrastructure related sector was dominated by public sector enterprise. But after liberalisation, private sector companies has started growing in leaps and bounce and availability of global finances has made it possible for them to think beyond limitations.

Competitions - In terms of decision making speed and efficiency, public sector enterprises are no match for private sector enterprises. So, apart from a few navaratna companies, most of the public sector enterprise was unable to cope up with the pace and became loss making enterprises.

Way Out "A New Look" - Public sector enterprise and private sector enterprise should co-exist, but the area of operation has to be different. Public sector enterprise should pave the path for private sector enterprises. Lets see the example of telecommunication sector. BSNL has started the telecommunication revolution in India. Private sector enterprise has entered in this sector later. But, look at the situation today. BSNL is not the preferred companies today in urban and semi urban cities. Service and facilities offered by the private sector enterprise can never be matched by bureaucratic enterprise like BSNL. But in RURAL India, BSNL is still the preferred service provider.

So ideally, public sector enterprise should engage themselves for development of new area. When private sector enters and matures, public sector enterprise should look for new ares for development, rather than competing with private sector. India is a vast country. There will always be areas which need attention for development.

Yes, this way, public sector enterprise will not be making profit. But that should not be the objective also. Let the profit objective to be the main driving force for private sector enterprise. Public sector enterprise should work towards development rather than profit. Efficiency parameters can be set in a different way to measure the performance.

Indian Airline is operational in major cities. But they are unable to compete with private sector and incurring huge losses. This is a wastage of resources. Rather if they concentrate on areas where having the route is more of an obligation rather economics (like in North Eastern states), they can reduce their losses and leave the route connecting major cities to private sector.

Conclusion - Private sectors will be more interested to be operational in areas where it make sense in terms of economics. But, for such a large country like India, there will be areas which need to be developed irrespective of economics initially to bring those small areas in to growth phase. And, for this purpose, public sector enterprise is the only option.

So, both public sector and public sector should co-exist, but what is required is a proper planning and positioning of these public sector enterprise, so that they can find a meaning for their operation.

Do you agree with the above points or have a different point of view? Leave your comment below.