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Privatisation

Meaning, methods (transfer of ownership and disinvestment), and the Maharatna/Navratna/Miniratna classification of PSUs in India.

Notes

Privatisation

Class 12 Indian Economic Development — Meaning, Methods, and PSU Classification

Meaning and Methods of Privatisation

Privatisation
The shedding of the ownership or management of a government-owned enterprise. Implies a greater role for the private sector in economic activities.

Transfer of Ownership & Management

Selling public sector companies from the government to the private sector — both ownership and management control are transferred.

Disinvestment

Privatisation of PSUs by selling off part of the equity of PSUs to the public. The government dilutes its stake while retaining some control.

Purpose: Mainly to improve financial discipline and facilitate modernisation. It was also believed that private capital and managerial capabilities would help improve the performance of PSUs.

Examples: The Indian Government has diluted its stake in several public enterprises including IPCL, IBP, and Maruti Udyog.

Maharatnas, Navratnas and Miniratnas

The government granted autonomy to PSUs to improve efficiency by giving them managerial decision-making power. Special status was granted as Navratnas and Miniratnas.