One of the reasons why the most people who have a choice prefer a private sector job to a government job is the salaries. The salary for a government job may be restricted by budgetary constraints, but private sector company employees can afford to use Kashwere and other similar materials.
Privatisation of many companies is a policy decision taken by the government of the day. However, it can be reversed any time, especially when there is a change in government. Large private sector companies can be converted into government organizations, some times reducing their efficiency.
Though the government share holding pattern may be similar in different public sector units, there is a significant difference in the work culture in government organisations even in the same sector. This is mainly related to the background of the company, how it has evolved and the management.
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Worker buy-outs almost always fail. First of all, workers rarely own or can borrow sufficient money to buy the enterprise, much less to replace antiquated machinery. And they tend to be inexperienced in those areas in which businessmen specialise – borrowing money, issuing shares, insuring their company and marketing their products. Entrepreneurship is an unusual and demanding skill, and most workers – indeed most human beings – do not have that skill. So turning a company over to its workforce is often the cruelest strategy, because then the company dies a slow, lingering death as workers struggle to do something beyond their capabilities.
The same can be said of privatising companies to the current crop of cooperatives. Today these tend to be public sector enterprises, which have most of the shortcomings of other SLPEs. Of course, if cooperatives were converted into Mutually Aided Co-operative Societies and developed a proven track-record of commercial success, then they might well be equipped to rescue a former government-owned company.
While India has been slow to privatise overall, there are still considerable success stories, especially in Andhra Pradesh. The former Mahindra-Nissan LC vehicle factory in Zaheerabad was privatised in the 1990s, becoming Mahindra&Mahindra. Under government management it lost money, and only produced four or five vehicles per day. After privatization it now produces more than 50 vehicles a day, and its turnover increased from Rs. 60 crores per year before privatisation to more than Rs. 240 crores now. Government did not have the resources to invest enough to let the company grow so fast – only the private sector could do that.
But capital investment and productivity is not the entire story. The company’s private owners invested heavily in their own workforce. Salaries have increased by 150%, and workers are given training to keep upgrading their skills. Bonuses are commonplace and particularly hard-working and intelligent workers are sometimes given two promotions at once – there are no government-style waiting periods because the private sector bases its promotions and benefits on efficiency. Unions, management and workers collaborate closely, because they each know that more efficiency equals higher profits, allowing the company to pay more and provide better conditions for its workforce. Privatisation means cooperation, and everyone shares in the improvements that they make together.
Privatisation brought the United Kingdom from being nearly bankrupt in 1980 to its re-emergence as a world economic leader. Privatisation brought similar benefits to the vast majority of countries ranging from Eastern Europe to Africa to South Asia and South America. Fewer than a dozen countries have avoided privatization, and they are the world’s most embarrassing economic failures – North Korea, Cuba, etc.
It works in rich countries like Britain and Saudi Arabia. It works in poorer countries like Tanzania and Sri Lanka. It works in the ‘North’, in Poland and Germany, and in the ‘South’ in Chile, Zambia and Bangladesh. It works in so-called ‘socialist countries’ like China, and so-called ‘capitalist’ countries like Singapore. Location or relative wealth, or literacy, or infrastructure do not matter – privatization works everywhere.
Privatisation is the great economic success story of the past 20 years, over which thousands of crores in government assets have been transferred to the private sector in more than 150 countries around the world. Experts, from every continent, credit privatization with reducing government debt and rebuilding both large and small industries, turning them from loss-makers into profitable, tax-paying enterprises.
Sometimes experts argue over the best way to privatize, but virtually all of them agree that privatization works, and is an economic necessity for most countries.
Privatisation is the best way to resuscitate and rebuild weakened State Level Public Enterprises (SLPEs).
* Stops loss-making SLPEs from adding to government debt;
* Depoliticises SLPEs, remove governmental pressures for over-manning and the sub-optimal use of resources;
* Gives new owners a strong incentive to turn around failing SLPEs into successful businesses;
* Gives new businesses access to investment capital that government cannot provide;
* Raises more money for government through taxing former SLPEs;
* Expands an enterprise and an industry, in the long run creating more jobs and generating wealth for the country.
Privatisation means transferring the control of an enterprise from the government sector to the private sector. Generally, but not always, this also means transferring ownership of the Public sector enterprise as well as control.
It can be accomplished by sale or lease. It can be accomplished by the government selling 100% of an enterprise, or selling 51%, or even by selling a minority stake – so long as the private sector is given full managerial control. Without transferring control to the private sector, the government can rise money by selling a smaller share, but that is not privatisation as such.