Advantages of Privatisation
• Increase Performance Level
The process of privatization enables companies to perform more efficiently which results in better
performance level. Private companies are profit-incentivised unlike government companies that are
politically motivated. Privatization eliminates the unnecessary elements such as red-tape and
overwhelming bureaucracy from the enterprise. In addition to this, employees are accessed by
private companies on the basis of their performance which spur the overall organizational
performance.
• Better Customer Service
Private companies offers better customer service in market as they are profit driven. They operate in
environment where their primary focus is on grabbing more customers by providing quality services.
is lacked by state-owned companies which are neither financially motivated nor faces any
experience gets enhanced by availing services of private sector due to removal of unnecessary

• Rid Of Political Intervention
The primary benefit provided by privatization process is removal of governmental influence in business operations. Public companies are mostly driven by political
agenda which prevent company from taking any decisions bring economical benefits to them. However, private companies are not influenced by any political factors
and driven by profitable decisions only.
• Attraction Of Investments
Privately-run companies are more easily able to gain investor confidence due to their financially and economically sound infrastructure. This companies bolsters the
economy via high inflow of investments both from national as well as foreign level.
• Increased Competition
Companies which are owned and run by government enjoys monopoly in market and remain uninterrupted by competition. However, the private firms coming in
market due to privatization engages more in more active manner and encourages competition. It will turn accelerate the rate of economic as well as industrial
growth and avoid monopolistic sluggishness in the market.
• Promotes Market Dynamism
An economy is liberated from government control by the process of privatization. The market operates in an organically manner in absence of government
regulations and dictating market progression. Lack of interference from government enables market in following integral economic values of demand and
supply and make them more dynamic. Higher revenue and good customer response is attained by market which are dynamic in nature and running
organically.

• Long-Term Goals And Ambitions
Private sector companies have well established long-term goals and ambitions which they follow by carrying out activities
efficiently. On the other hand, state-run companies can at times only think about the upcoming elections. Their goals may be
of short-term which are focused towards gaining favors of voting public.
Examples of Privatisation:
1. BALCO is an abbreviation for Bharat Aluminium Company Limited. BALCO was incorporated as a public sector
undertaking in 1965. It holds the distinction of being the first aluminium producing Public Sector Undertaking
(PSU) in India since 1974. BALCO was a public sector enterprise till 2001, with the government of India having
100% stake in the company. In 2001 the government relieved 51% of its equity and control of management in
favour of Sterlite Industries India Limited (Parent Company – Vedanta Group). Thus, BALCO, a public enterprise
became a private enterprise.

Pros of Privatisation of BALCO:
1) Financial Security
Though, the company was running in profit, before its privatization; only 50%
of it was due to operations, while the rest 50% was because of interest
earned over the fixed deposits. Privatization thus opened new investments
into the company by private players, which the government was incapable of
for some reason or the other.
2) Technology Improvement
Privatization of BALCO, even opposed by employees, was good for
improvement of production facilities in terms of machinery and
infrastructure, ultimately resulting in more production. Sterlite Industries
India Limited had the experience of operating the largest copper smelter
plant in India. Moreover the cash reserve of 437 crore which the BALCO had
accumulated was not enough for its modernization which would require a
sum of Rs 4000 crores.
3) Introduction of VRS (Voluntary Retirement Scheme)
The Sterlite management introduced a Voluntary Retirement Scheme for the
BALCO employees who wanted to retire with all the sue benefits. The
scheme was active from July 31 – august 16, 2001. A total of 956 VRS
applications were accepted, a majority of which included workers.

The new formed management of BALCO entered into a long term wage agreement of five
years with the employees, effective from October 7, 2001. In the agreement a
guaranteed benefit of 20% over the basic pay was assured to the employees. Night
shift allowance, canteen allowance, transportation allowance, education allowance
and hostel allowance were all increased appropriately. An annual leave travel
allowance of Rs 6000 was also assured.
5) New Managerial Practices
With the BALCO’s privatization, new managerial practices like job rotation and
appraisals were introduced. These practices were absent when the company functioned
under the Government of India. It gave the management an opportunity to properly
utilize its man power resource and also to adequately reward its employees for their
efforts.
6) More Financial Investment
Prior to the BALCO’s disinvestment, the Government of India didn’t had enough
accumulated cash to make technological improvements in the company. There was a
requirement of over Rs 400 crores to meet the basic improvements. However, the new
management proposed to invest Rs 6000 crores and assured to increase the production
four times.
7) Long Term Gains
BALCO which registered a turnover of Rs 898 crores in 2000 has now escalated to
whopping Rs 9000 Crores in the financial year 2017-2018. This was made possible only
by transferring 51% stake of company into the hands of SIL, which had the money and
the resources to invest in the improvements of production facilities.