Privatization

The term privatization has come into vogue since the middle of the 1970s. There is no single universally accepted definition. The term may be interpreted in a narrow sense or a wide sense. In a narrow sense the term privatization implies advertisement. If means the sale by the state of whole or part of its holding of the equity shares of a government-owned enterprise to private shareholders. Total change of ownership from the public to the private sector is known as denationalization.

In a wider sense privatization may also mean Liberalization. Liberalization implies derecognition, decontrol, delicensing expansion of economic activities in the private sector etc. There may be liberalization of economic policies in the field of foreign trade, fiscal and monetary policies and industrial development. Under the Industrial Policy Resolution of 1956, certain industries were exclusively reserved for development in the state sector. Any relaxation in respect of such an exclusive reservation could be a part of the privatization process. For example, in India in the recent years the private sector has been allowed to enter into fields like telecommunication, power, defense items etc.

Privatization may take place by way of leasing of a public enterprise to a private sector party, or contracting out economic activities to private parties. In the U.S. certain public services like garbage collection, waste disposal, etc., were leased out to private parties. In India also leasing of catering in the railways or contracting out 17 defense items are instances of privatization.