1public sector reforms in india
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PUBLIC SECTOR REFORMS
Presented By:
44. Mahesh Shringi
45. Mathew K.N.
48. Mohd Shahab Alam
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POLICY REFORM IN PUBLIC ENTERPRISES
Overview on Industrial Policy The Statement on Industrial Policy, of July 24, 1991, recognized the many
problems that have manifested themselves in many of the public enterprises
and sought to rectify these problems.
It noted that many public enterprises have become a burden rather than
being an asset to the Government.
Measures must be taken to make these enterprises more growth oriented
and technologically dynamic.
Units which may be faltering at present but are potentially viable must be
restructured and given a new lease of life.
The areas reserved for the public sector were reduced drastically from 17 to
8 and later to 6.
In manufacturing, the only areas which continue to be reserved for the public
sector are those related to defense, strategic concerns and petroleum.
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What Has Been Done So Far ???
1. De-reservation of the Public Sector and De-licensing In the manufacturing sector, the reserved areas for the public sector now
only include defense production and mineral oils.
In the case of mineral oils private investment & foreign investment is invited ,
but on a discretionary basis.
The other reserved areas are in respect of atomic energy, minerals related to
atomic energy, coal and lignite, and railway transport.
Mining of iron ore, manganese ore, chrome ore, etc., and mining of non-
ferrous metals, which was earlier reserved for the public sector was further
de reserved in 1993. Thus, from the original list of 17 now only 6 areas still
remain reserved for the public sector.
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What Has Been Done So Far ???
All sick (bankrupt) public sector industrial firms now have to be restructured
through revival, rehabilitation, or closure if found to be unviable.
Once the bankrupt public sector firms are referred to the BIFR, the
government has, by necessity, to make decisions that result from the orders
of this Board.
Procedure of BIFR:
1. After referral to the BIFR the Board first has to decide whether a firm has been correctly
referred to them
2. If accepted firm is usually asked to put forward its own proposal for a restructuring program.
3. If this is not found to be satisfactory an operating agency (OA) is appointed in order to examine
its viability or otherwise.
4. After the operating agency submits its report recommending restructuring or closure, hearings
are held involving all the interested creditors, owners and labour.
5. A decision is given after all interested parties have been heard.
2. Referral of Sick PSEs to BIFR (Board of Industrial & Financial Reconstruction)
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What Has Been Done So Far ???
3. The National Renewal Fund (NRF)The National Renewal Fund was established in 1992 to provide a social safety
net for workers affected by industrial restructuring.
Intentions of NRF:
1. to provide compensation to workers who would be affected by industrial
restructuring
2. to assist such workers in re-training and re-deployment
3. to provide resources for employment generation in areas affected by
industrial restructuring.
4. provision for compensating workers who opt to take voluntary
retirement from existing public sector enterprises.
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What Has Been Done So Far ???
4. Dis-investment of Equity
Reasons of Dis-Investment:
a) offer a randomly structured portfolio of shares each with notional
reserve price based on a complex valuation procedure
b) to off-load the shares to institutional investors as a buffer between the
Government and the stock market.
Critic:
Criticism of disinvestment process has been that it has essentially been
seen as resource raising exercise by the government
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What Has Been Done So Far ???
5. Greater Autonomy to Public Enterprises
It involves the setting of relatively detailed performance targets through
mutual discussions between the PSE, The Administrative Ministry and
Professional Consultants on an annual basis.
A grading system was introduced to rate PSU as Excellent",Very Good",
Good", "fair" and "poor to judge whether the PSE is to be referred as sick
or not on the basis of set targets.
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Need For Public Sector Reforms
Need of
Reforms
Conflict of
objectives
Loss or low
rate of
return
Lack of
professiona-
lism
Time and
cost
overruns
Underutilis-
ation
Political
Interference
Operational
inefficiency
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Need For Public Sector Reforms
Conflict between financial and social objectives
Problem of losses or low rate of returns
Lack of Competition
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Need For Public Sector Reforms
Lack of professionalism in management
Time and cost overruns in new projects
Operational inefficiency
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Need For Public Sector Reforms
Underutilisation of capacity
Political Interference
Lack of sensitivity to customer need
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Changes after Reforms
Among the fastest growing economy
Now the share of private and public sector in the ratio 78:22
Only 3 sector confined under the Government
PSU starts gaining efficiency and making profit
Became the major part in the economic development
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Role of Public Sector In Growth of India
1. Maximizing the rate of economic growth.
2. Development of capital-intensive sector.
3. Development of Agriculture .
4. Balanced regional development.
5. Development of ancillary industries.
6. Increasing employment opportunities.
7. Model employer.
8. Preventing concentration of economic power.
9. Establishment of a Socialist pattern.
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Role of Public Sector In Growth of India
10. Import Substitution.
11. Production and Sales.
12. Mobilization of resources.
13. Research and Development.
14. Export promotion.
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