31222627 liberalization privatization ppt (1)

7/31/2019 31222627 Liberalization Privatization Ppt (1)

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Privatizationand urban development


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Disinvestment

Disinvestment of the Governments equity in CPSUs started in 1991-92,

Whenminority shareholding of the Central Government in 30individual CPSUs was sold to selected financial institutions (LIC, GIC,UTI) in bundles.

In order to ensure that along with the attractive shares, the not soattractive shares also got sold. Subsequently, shares of individual CPSUs

were sold and the category of eligible buyers was gradually expanded toinclude individuals, NRIs and registered FIIs.

By 1997, sale was also initiated and MTNL (1997-98), VSNL (1998-99)and GAIL (1999-2000) all used the opportunity to access the GDRmarket.

The number of listed CPSUs on domestic stock exchange stood at 42 ason 31.3.2006.


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Disinvestment Commission

The government constituted an independent body, the Disinvestment

Commission in 1996. The main terms of reference were:-

A comprehensive overall long-term disinvestment programmewithin 5-10 years for the PSUs referred to it by the Core Group.

To select the financial advisors for specified PSUs to facilitate thedisinvestment process.

To monitor the progress of disinvestment process and takenecessary measures.


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1999 Onwards The progress of disinvestment in India was very slow

According to the balance sheet of the government, at the end of March2000, the investments totalled Rs.2,52,554cr.

Except for three years (1991-92, 1994-95 and 1998-99), the budget

targets for disinvestment were not met.

Between 1991-92 & 1999-2000, the total realisation Rs. 18,368 cr against the targeted - Rs. 44,300 cr.

More than 40 % of government equity had been disinvested in HPCL,

VSNL, MTNL, IPCL and Hindustan Organic Chemicals.


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Disinvestments so far..

S.No. Name of the CPSEs % of equitydisinvested

Name of the buyer Proceedsrealized (Rs.in

crore)

1. Bongaigaon Refineries &

Petrochemicals Ltd.

(BRPL)

74.46 Indian Oil Corporation

Limited

148.80

2. Chennai Petroleum

Corporation Limited

51.81 Indian Oil Corporation

Limited

509.33

3. Kochi-Refineries Limited

(KRL)

55.04 Bharat Petroleum

Corporation Limited

659.10

4. Modern Food Industries

(India) Ltd.

74% Hindustan Lever Ltd. 105.45

5. Maruti Udyog Ltd. 45.79% Suzuki Motors 1,000.00


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Strategic Sale cases called off

S.No.

Name of the CPSU Percentage of equity which was earlierproposed to be sold through StrategicSale

1 Manganese Ore India Limited 51%

2 Sponge Iron India Limited 100%

3 Shipping Corporation of IndiaLimited

54.12% (51% through Strategic Sale and 3.12%to Employees)

4 National Aluminium CompanyLimited

61.15% (10% Domestic Issue, 20% ADR Issue,29.15% Strategic Sale, 2% to Employees)

5 National Building ConstructionCorporation Limited

74%

6 National Fertilizers Limited 53% (51% through Strategic Sale and 2% toEmployees)

7 Rashtriya Chemicals and FertilizersLimited

53% (51% through Strategic Sale and 2% toEmployees)


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Sector-wise Performance

Steel Telecom

Banking

Insurance


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Steel

India set plans in motion to partially privatize its nationalized industriesin 1993. As such, 10 percent of SAIL was offered to private investors overthe next several years.

Although India started exporting steel way back in 1964, exports were notregulated and depended largely on domestic surpluses. However, in the

years following economic liberalisation, export of steel recorded aquantum jump.

After de-licensing of Indian Iron and Steel Industry and as a result of thesteps taken for creation of additional capacity in the private sector, 19projects involving a total investment of Rs. 30,835 crores equivalent to acapacity of approx. 13 million tonnes per annum have already been

cleared by Financial Institutions and are in various stages ofimplementation. Already 8 units with a total capacity of Approx 5.45million tonnes have already been commissioned.


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Telecom Sector

India introduced private competition in value-added services in 1992followed by opening up of cellular and basic services for local area toprivate competition.

The Telecom Regulatory Authority of India (TRAI) was constituted in1997 as an independent regulator in this sector.

Competition was also introduced in national long distance (NLD) andinternational long distance (ILD) telephony at the start of the currentdecade.

FDI in telecom sector which opened up with 49%, has been increased to74% equity cap in 2004-05 Budget.

As many as 72 million new phones have been added since 2007-2008


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Insurance Sector

Insurance sector was opened up in August 2000.

Private sector insurance companies with foreign equity allowed up to26% were allowed to enter the field.

An independent Insurance Development & Regulatory Authority hasbeen established.


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Foreign Investment In India

After reforms in 1992, huge amounts of foreign direct investmentcame into India

In 1993, foreign institutional investors were allowed to purchaseshares of listed Indian companies in the stock market

Foreign direct investments in India are approved through two

routes:a) Automatic approval by RBI

b) The FIPB Route


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Foreign Direct Investment

Exploration or mining of coal orlignite for captive consumption

74%

Roads and Highways, Ports and Harbors 74%

Exploration and mining of diamondsand precious stones

74%

Projects relating to electricitygeneration, transmission anddistribution (other than atomic powerplants)

74%


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Continued.

Banking 74%

Airports Up to 100% with FDI, beyond 74%requiring Government approval

Infrastructure related to marketingof petroleum products

100%

Telecom Services 74%

Civil Aviation 49%

Insurance 26%


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Industrial policy has seen the greatest change, with most centralgovernment industrial controls being dismantled. The list of industriesreserved solely for the public sector -- which used to cover 18 industries,including iron and steel, heavy plant and machinery,telecommunications and telecom equipment, minerals, oil, mining, airtransport services and electricity generation and distribution -- has been

drastically reduced to three: defense aircrafts and warships, atomicenergy generation, and railway transport.Industrial licensing by thecentral government has been almost abolished except for a fewhazardous and environmentally sensitive industries.

The requirement that investments by large industrial houses needed a

separate clearance under the Monopolies and Restrictive TradePractices Act to discourage the concentration of economic power wasabolished and the act itself is to be replaced by a new competition law

which will attempt to regulate anticompetitive behavior in other ways.

Reforms in Industrial Policy


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MRTP Act and License Raj

The Monopolistic and Restrictive Trade Practices Act, 1969, aimsto prevent concentration of economic power to the common

detriment, provide for control of monopolies and probation of

monopolistic, restrictive and unfair trade practice and protect

consumer interest.

License Raj refers to the elaborate licenses, regulations and

accompanying red tape that were required to set up business in India

between 1947 and 1990. the license Raj was a result of Indias

decision to have a planned economy, where all aspects of the

economy are controlled by the state and licenses were given to a

select few.


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After privatization

Some things favorable in the privatization

Better infrastructure

New job opportunitiesBetter performance

Better process of working

Increase in profits

Service motiveBenefit to consumers.

No bureaucratic process.


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Some bad aspects

Only profit motive

Pressure of work

Target base working

No social service

Unethical practices


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Thank You

31222627 liberalization privatization ppt (1)

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