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Forms of Privatization – Ownership, Management & Outsourcing

Privatisation can take different forms, not only sale of ownership.

1. Meaning / Overview

Forms of privatisation refer to the different methods by which private sector participation is increased, such as selling ownership, transferring management or outsourcing activities.

2. Major Forms of Privatisation

1. Ownership Privatization

  • Government sells majority or full ownership of PSE to private investors.
  • Example: Strategic sale of a government company to private group.

2. Management Privatization

  • Ownership may remain with government, but management control is given to private entity through management contracts, lease, or PPP (public–private partnerships).

3. Outsourcing / Contracting Out

  • Government or PSE outsources certain services (cleaning, security, IT support, catering) to private firms while retaining core functions.

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3. Advantages / Disadvantages of Each Form

Ownership Privatisation

  • Advantages: Strong incentives for efficiency; government gets funds; no need to run business.
  • Disadvantages: Loss of control; social and employment concerns.

Management Privatisation

  • Advantages: Professional management while government retains ownership; suitable where full sale is sensitive.
  • Disadvantages: Possible conflicts between owner and manager; results depend on contract design.

Outsourcing

  • Advantages: Focus on core activities; cost savings; flexibility.
  • Disadvantages: Quality control issues; dependence on contractors.

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4. Indian Context / Examples (Conceptual)

  • Ownership: Strategic sale of certain PSEs.
  • Management / PPP: Private operation of metro rail, airports, toll roads under PPP models.
  • Outsourcing: Many government departments outsource cleaning, security, IT maintenance.

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5. Quick Revision Points

  • Forms: ownership transfer, management contracts/PPP, outsourcing.
  • Each form has different degrees of private involvement and risk.
  • India uses a mix of these forms in various sectors.

6. Quiz Time 🎯

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