Advantages and disadvantages of disinvestment of psus
Answers
Answer:
The advantages of transferring government-owned assets to the private sector are increased efficiency and profits, largely because competition incentivizes innovation and improvement. The disadvantages of privatizationare decreased regulation and government revenue.
Advantages
1.To achieve greater inflow of private capital
E.g. This revenue can be used to compensate the deficit finance.
2. Allows new firms to enter into the market and thus increases competition
3. Brings the low productivity PSUs back on track thereby improving the quality of goods, eliminating excessive manpower utilization and enabling high profits.
Disadvantages
1. Loss of public interests
Eg. PSUs are resources of the nation. They belong to the people. By selling them to private companies, government is seriously affecting the people's welfare.
2. Fear of foreign control
Eg. Selling equities to foreign companies result in serious consequences shifting the nation's wealth, power and control to outsiders.
3. Issues with workers
Eg. The jobs of Lakhs of workers in the PSUs will fall in danger by privatization.
4. Less number of bidders
Eg. Even though government plans to disinvest, there are actually less number of people willing to place