Yes, for competitiveness | No, strategic sectors must stay with govt | Hybrid model

“The business of government is not to be in business, but to make business possible.” – Milton Friedman

India’s debate on privatization sits at the heart of its economic philosophy — whether the State should run enterprises or enable private enterprise to thrive. Since Independence, Public Sector Undertakings (PSUs) have been pillars of industrialization, national integration, and social equity. But as India moves towards a $5-trillion economy, the question resurfaces: should we privatize all PSUs, or retain control over strategic ones?

Those who support full privatization argue it brings efficiency, innovation, and fiscal discipline. PSUs once vital to nation-building — from Air India to BSNL — have in many cases turned into loss-making entities due to bureaucratic management, political interference, and lack of competition. As of 2024, over 50% of India’s 250+ PSUs are making losses or earning below-market returns. The government spends thousands of crores annually to keep them afloat. Privatization helps unlock capital for development, attract global investors, and improve service quality. For instance, the Air India disinvestment transformed it under Tata Group, improving punctuality and customer satisfaction while reducing government liability by ₹61,000 crore. Similarly, privatization of airports and power distribution in some states has increased efficiency and consumer satisfaction. With private participation, sectors like banking, telecom, and insurance have seen exponential innovation — from UPI-based fintechs to 4G expansion. Proponents thus claim that government should govern, not do business, and competition should drive performance, not state protection.

However, opponents warn that complete privatization could endanger national interests and social welfare. Strategic sectors like defence, energy, railways, and public banking are critical for sovereignty, security, and inclusivity. Private players focus on profit, not public service — meaning rural areas, weaker sections, or unprofitable routes may be ignored. For example, coal and defence manufacturing, vital for national security, cannot rely solely on profit-driven entities. Moreover, unchecked privatization risks creating private monopolies, leading to higher consumer costs — as seen in certain telecom or airline sectors post-consolidation. PSUs like ONGC, NTPC, and ISRO’s collaboration units contribute significantly to self-reliance and research. The LIC IPO (2022) showed that excessive privatization could also erode public trust in long-standing institutions. Hence, critics suggest that instead of selling everything, the focus should be on professionalizing management, introducing accountability, corporate governance, and partial disinvestment rather than full ownership transfer.

A balanced view supports a hybrid model — privatize non-strategic PSUs, retain control in key areas. This aligns with the government’s Strategic Disinvestment Policy (2021), which divides PSUs into four broad sectors — defence, atomic energy, transport, and banking — where a “bare minimum presence” of the State will be maintained. Others can be privatized or merged. Under this model, the government acts as a regulator and investor, not a manager. It ensures both efficiency and national control. Successful cases like BPCL, Hindustan Zinc, and Container Corporation prove that joint management can deliver strong returns without full privatization.

From a defence and security perspective, India must retain strategic autonomy. PSUs like HAL, DRDO, and BEL play vital roles in indigenization under “Atmanirbhar Bharat”, ensuring that critical defence technologies are not outsourced to foreign or private monopolies. Yet collaboration with the private sector through FDI in defence manufacturing has boosted innovation, showing the potential of public-private synergy.

In conclusion, the goal should not be to “sell the family silver” but to polish it for better yield. Privatization, when selective and transparent, can unleash efficiency; but reckless privatization risks national security and equity. India’s ideal path lies in a hybrid, reform-driven model — where the public sector leads in strategy and the private sector delivers performance.

“The future of India’s economy lies not in state control or total privatization — but in smart partnership guided by national interest.”