Globalization, liberalization, Privatization and the Public Sector in India

Globalization, liberalization, Privatization and the Public Sector in India

Thus owing to the’ reasons above the New Industrial Policy of 1991 contained following provision; with regard to the public sector.
1. Reduction of the role of the public sector to few strategic, hitech and essential infrastructure areas.
2. Entry to private sector in some of the areas earlier reserved for the public sector. Expansion of the public sector to the areas not reserved for it.
3. Chronically sick public enterprises will be referred to the Board  of Industrial and Financial Reconstruction (BIFR) for formulation of revival and rehabilitation schemes.

4. A social security mechanism to protect the interests of workers who will be affected by the rehabilitation of sick public enterprises.
5. A part of the government’s share-holding in the public sector offered to mutual funds, financial institutions, general public and workers.
6. Boards of public sector companies to be made more professional and autonomous.
7. Introduction of system of Memorandum of Understanding to grant autonomy and subsequent accountability to the management of public sector enterprise for the results.
8. Progressive reduction of the budgetary support to public enterprises.

As a result of these macroeconomic policy reforms the government has taken various measures to reform the public enterprises. These are as follows;
1. Since 1991 the government dereserved various industries which were earlier monopoly of public sector. Today only three areas stand reserved viz., atomic energy, minerals specified in the schedule to the atomic energy (control of production and use) order, 1953 and rail transport. Some dereserved areas are opened to domestic as well as foreign private enterprises.
2. In 1991, the Sick Industrial Companies Act (SICA, 1985) was amended to enable the sick public enterprises to be referred to the Board of Industrial and Financial Reconstruction (BIFR, 1987) for revival or closure.
3. In 1988, government initiated the Voluntary Retirement Scheme (VRS) to help the public enterprise to shed excess manpower.
4. In 1991 -92, the disinvestment programme was started with the main objective of raising non-inflationary kind of finance for the government budget. The government established a full-fledged department of Disinvestment in 1999.

Disinvestment is a process whereby the government withdraws a  portion or the total of its equity in a public enterprise.
5. The government identified nine leading, well-performing and high profit-making public enterprises as the ‘Navratnas’ which were granted autonomy and operational freedom in fields like financial, commercial, managerial, and organizational to improve their global performance. Their Boards have also been professionalized by bringing in non-official part-time professional Directors.
List of Navratnas
1. Steel Authority of India Ltd.
2. Bharat Heavy Electricals Ltd.3. Oil and Natural Gas Commission.
4. Indian Oil Corporation Ltd.
5. Hindustan Petroleum Corporation Ltd.
6. Bharat Petroleum Corporation Ltd.
7. Gas Authority of India Ltd.
8. National Thermal Power Corporation Ltd.
9. Mahanagar Telephone Nigam Ltd.

The ‘Navratnas’ have freedom to: incur capital expenditure without any monetary ceiling; enter into technology joint ventures or strategic alliances to obtain technology; to effect organizational restructuring including establishment of profit centers, opening of offices in India and abroad; decide on the posts below the Board level; raise capital from the domestic and international markets; establish financial joint ventures and wholly  subsidiaries in India and abroad; and to deal with manpower management.
6. The government further identified some profit making public enterprises as ‘Miniratnas’ and granted them financial, managerial, and operational autonomy. These were divided into two categories depending upon their recent performance, Miniratnas I and Miniratnas II. Both these categories are those which have positive
net worth, have not defaulted in the repayment of loans/interest to the Government and have not sought budgetary support from the Government.
The Miniratnas have freedom to: incur capital expenditure without  government approval upto Rs. 300 crores or equal to their net worth whichever is lower (for Miniratnas-I) and upto Rs. 150 crores or upto 50% of their net worth whichever is lower (Miniratnas-II), enter into financial joint venture, establish subsidiary companies and
overseas offices, enter into technology joint ventures, and work out their own manpower policies.
7. The system of memorandum of understanding (MOU) was introduced in 1987-1988 after the recommendation by the Arjun Sengupta Committee (the committee to Review the Policy for the Public Enterprises) Report of 1986.
MOU is an agreement between the Government and the public enterprises management to grant autonomy to latter, that is, to reduce day-to-day interference of the ministry in the management of public enterprises. It defines obligations of both the parties for improving performance of public enterprises. It makes public enterprise management responsible for results.

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