Privatization and Public Regulation

Abstract

In many developing and developed countries, privatization through transfer of ownership from public to the private hands is considered as a cure for most of the problems faced by the public sector enterprises (PSEs.) However, policy makers tend to forget that both the systems – private and public – are imperfect. If market failure necessitates the need for government intervention, then failures associated with the government require more market friendly policies. This implies that at any point of time both systems will coexist i.e. privatization will go hand in hand. The present article attempts to discuss the modalities of privatization options and public regulation adopted by India.

Multi-dimensional public–private partnership readiness index: a sub-national analysis of India

“…The presence of government inefficiencies, in these cases, eventually leads to sub-optimal output and higher production costs (known as X-inefficiency). The presence of endemic market and Sub-national analysis of India non-market failures necessitates the prudence of adopting not just the criterion of the double market failure (Kaur, 2003) but also adopting PPPs as a modality of infrastructure procurement to help mitigate the gaps in the market and non-market failures. According to the X-efficiency theory (Leibenstein, 1966), PPPs are essential to make public organizations more competitive, thereby leading to X-efficiencies.…”

Disinvestment and Firm Performance- A Comparative Analysis of Strategic Sale vs. Public Offerings by Indian Pubic Sector Enterprises

“…In India, important studies in this context are Bhaya (1990), Trivedi (1990), Jha and Sahni (1992), Sharma and Sinha (1995), Majumdar (1995), Kaur (1998), andNaib (2002). Bhaya (1990) concluded that barring the burden of the fixed capital over which the public sector management has not control, and despite of higher wages and administered prices over which the management has not control, efficiency in public sector is in no way inferior to the private sector.…”

“…Using data envelopment analysis (DEA) to calculate firm-level efficiency for organized sectors of manufacturing industry from 1973-74 to 1988-89, author concluded that in aggregate state owned enterprises are less efficient than firms in the joint sector or the private sector. The joint sector firms are more efficient than state-owned firms, but less efficient than those in the private sector, while private sector is comparatively most efficient sector in Indian industry Kaur (1998). compared total factor productivity (TFP) of 15 public and 15 private enterprises from diverse sectors, viz., aluminum, steel, fertilizers, engineering, drugs and chemicals, and consumer goods.…”