Answer :

In 1991 the Government of India introduced the LPG scheme or the liberalization globalization privatization scheme. Disinvestment is a part of privatization. It is the selling of an investment. It implies the selling of government equity shares of public sector units in the market. It was started in 1992. The term privatization and disinvestment are completely different. Privatisation is when the government sells more than 51% of its ownership to private units. Disinvestment is below 50% where the government continues to have a major share.
India was facing a bankrupt situation prior to 1991. There were 236 public sector undertaking under operation. Out of which only 123 were making any profit. The top 20 profit making PSU’s counted for 80 % of the profits. This means that less than 10 % of the PSU’s were responsible for 80% of profits. The return on public sector investment for the year 1990-91 was just over 2 percent. The reason for the poor performance of the private sector was:
1. Poor capacity utilization
2. Low contribution to national income
3. A low rate of return on investment
4. Overstaffing and excessive delay

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