Goverment's agenda of privatization..!!

As we all know, the Government’s stake in Bharat Petroleum Corporation Limited (BPCL) was set to be sold off by the end of this year,2020.

As per the reports, the Government has decided not to sell off the 53% stake that it possesses in the BPCL this fiscal. 

Is privatization a good thing..??

Comeon, let us analyze by looking at both the merits and the demerits.

Indulging in privatization or not is often related to political ideology. The right wing economist worldwide, in general, favors privatization and the left wing economist are against it. Both sides have their own arguments for favouring it or being against it. So, look at it from a neutral point of view. "What are the differences between the two..??"

The purpose of private company is to earn profits. Where does the profit go..? To the stakeholders of that company and Who are these stakeholders..? The owners of that company. So, the profit that a private company earns, goes to the shareholders of that company.

Where does the profit of a public company go..? It goes to the government. The government can use it for the citizens of the country. The main purpose of a public company is not to earn profit but to impact welfare for the public. 

Now that earning money serves as a better motivation for people to work that's why it is believed that private companies are more efficient than public companies. Their employees work more effectively and work harder because of the benefit of money. And in order to remain profitable, the company takes a lot of decision that a public company would never do. And since public benefit is not such a great motivation for the employees. It is believed that public companies are lazy and their employees do not work well specially in India, and their customer service is not that great.

The ones in favour of privatization use to say that this is a free market economy. That is, any one can come up, create their own company and compete with the rest of the companies. If one sector has been privatized, for example, Airlines have been privatized. So anyone can come up and create their own airlines and this would enhance competition. And this increase in competition would mean that all the companies would try and offer better customer services, ensure lower prices for the customers and at the same time, make profit too. So this is the basic argument behind privatization

Now, what are the reasons of the people against privatization. Their argument is that the profit being earned is ending up in the hands of a few people, the public isn't benefited. The second point is that if profit remains the sole motive behind any service then it can destroy an entire industry.

The best example of this is the American school system. All the schools have been privatized in America. In general, going to the logic of privatization, everyone should have benefited and the prices should have fallen. All the children should have been imparted better education. Now the question arises "What happened next..?" The private schools increased their costs drastically due to which it became unaffordable for the economically weaker children. Private schools started this because making profits was the main motive. The rich got a lot of options to study but the studies became unaffordable for the middle and the poor class. So the entire education industry has been destroyed in a way. The third reason is that if the foreign companies get the opportunity to indulge in privatization in our country. This would mean all the profits earned by the company would transfer to abroad. Fourth reason is that even though we are told that a competition is created in a free market that anyone would be allowed to setup their own company.But in reality what happens is that monopolies begin to get formed. Becoming a monopoly simply mean that whatever prices the company decided upon. The customers would be forced to pay that because they would have no other options. And all the profit that  company would earn would go into a few hands. Due to this reason in most developed countries, the government makes better laws that encourage competition and prevent the formation of monopolies. 

Looking at all these benefits and drawbacks. I'd like to tell you there is a simple rule, wherever there are higher chances of monopoly we should not indulge in privatization for example healthcare. If privatization is done in the healthcare, then the companies would increase the cost of medicine, the hospital would also increase their prices because they would be interested in earning profit. Then the poor people would not be helped in such a case.

So, wherever it is difficult to make rules and regulations we should avoid privatization.

Kindly comment your opinions on privatization.