Reasons for Privatization

Reasons for Privatization

Reasons for Privatization

Privatization is the transfer of state-owned enterprises to private ownership. Many industries and sectors come under the public sector which means they are owned and run by government agencies. Privatization helps to raise revenues for the Government. However, gradually there has been a shift from these being governed by the public sector to the private sector. This shift has been termed as privatization. A number of factors have led to this change.

Governments take a privatization stance to reduce its burden in terms of underutilization of resources, over and redundant employment, fiscal burden, financial crises, heavy losses, etc. Under privatization either the government-held assets have been sold to the private owners and they have been given the whole and sole responsibility of handling certain industries or the government has allowed the private businesses to participate in the functioning of some industries. Competition is very important to obtain more efficient and effective public services. Expectations in Privatization are improved and strengthen competition, public finances, funding to infrastructure, and quality and quantity of services in terms of management.

Reasons for Privatization

Here are some of the main reasons for privatization:

Better Services – Until an exacting industry is under the public sector, it is governed by the government. There is no competition and no drive to execute better. The services offered are generally average as there is no comparison and no threat of losing the race. However, when an exacting industry goes to the private sector, the private owners are expected to set a bar for the value they are estimated to convey. They work hard and try to give in their best else they are at risk of losing the task assigned to them and suffering a huge loss. This ensures better service to the customers and has been one of the major reasons for privatization.

Better Customer Support – Besides getting good service from the private sector employees, the consumers also get good client support. The government employees are least interested in completing their tasks on time. Consumers need to call up over visit their offices numerous times in order to get their tasks done. However, this is not the case with the industries that have been owned privately. This is another cause why privatization was measured.

Cope up with Budget Deficit – The government has a particular budget set for each business. It requires accomplishing all its tasks within that exacting budget. Many industries under the public sector had begun suffering from losses and faced budget deficits. In order to cope up with this problem, the government measured the option of privatization.

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