Paragraphs on Privatization in India!

In India, only with the advent of New Economic Policy the Privatization, liberalization has been introduced as a policy. Soon after independence, the public sector in India, both Central as well as States, expanded indiscriminately to create vested interests by the politicians.

State Governments set up public corporations in several fields to expand the empire of the political parties, in order to give berths to political leaders, as Chairman or Vice-Chairman or Secretary or political member, etc. Losses accumulated in several state owned enterprises.

In some State Transport Corporations the losses were larger than the capital invested in them. Continuing losses compelled the government to increase taxation and curtail development expenditures. In due course, it became obvious that the behavior and functioning of the public sector had to be tamed.


The New Industrial Policy abolished the public sector monopoly in several industries. Only 8 industries are now exclusively reserved for the public sector as against 17 industries in Schedule A previously. This is a significant step towards privatization. Industries which are opened for the private sector include iron and steel, power, ship building, telephone and telephone cables, telegraph and wireless apparatus, air craft, air transport and heavy plant machinery.

The scrapping of the Schedule B, which contained 12 industries where public sector was to play a dominant role, is also an import policy change towards privatization. The new policy also proposes privatization of enterprises by selling shares to mutual funds, workers and the public.


The Central Government is also reviewing the existing portfolio public investment with a view to offloading public investment from areas where the following conditions prevail:

(a) Industries based on low technology, (b) Small-scale and non strategic areas, (c) Inefficient and unproductive areas, (d) Areas with low or zero social responsibility or public purpose, and (e) Areas where private sector had developed adequate expertise and resources.

However, the government is faltering with the issue due to opposition from trade unions and political parties to ensure their vested interests. The Government should have a clear view and strong will in this matter.