Monday, August 21, 2017

Air India disinvestment: Are we Learning Lessons in Privatization?

Nationalization and privatization are the two alluring terms between which the pendulum of political economies swings. Governments, committed to welfare, not only nationalized existing businesses but also invested huge sums of money in post-war period.  Winds of privatization blew in 1980s with Ronald Reagan and Margaret Thatcher at the helm in US and UK respectively. Privatization for efficiency remained their motto.
Ms. Thatcher during her term as PM (1979-1991) initiated the privatization boom, which was emulated around the world. During her term, more than 50 companies were sold or privatized raising more than 50 bn pounds for the exchequer. The interesting names were British Petroleum, British Telecom, British Airways, Jaguar and Rolls Royce. Mr. Reagan during his term (1981-89) too saw privatization of airports, railroads, power agencies and weather satellites.
Nationalization of businesses like airline, banking and insurance and massive public investment in basic and key industries defined socialist tilt of the government in post-independence India. However, the operational efficiency of Public Sector Enterprises (PSEs) remained suboptimal. The PSEs were often compared with white elephants that survived on tax-payers money.
Privatization of Public Sector Enterprises (PSEs) was an important pillar of the agenda of 'Reforms of 1991'. 26 years down the line, the government of India has been struggling to find a policy that works. The slogans like 'it is no business of the government to be in businesses' have a lot of appeal but falter at the level of execution.  
21/08/17 Dr. Pallavi Mody/Business Today