10 points why should Govs go for Privatization
1. Improved efficiency
Privatization is most of the time associated with improved efficiency due to the profit incentive. Private companies will ensure they improve their operational efficiency in order to reduce their costs and improve on profits.
2. Reduces the government’s political interference
Privatization reduces the government’s political interference. The government sometimes seems incapable of making hard decisions especially when they impact their political footing such as layoffs and pay cuts which are bound to attract negative publicity.
3. Improvements in the company through competition
Privatization urges improvements in the company through competition. When a state owned entity is privatized it loses its government protection and is forced to adapt to the market by providing better services or products in order to survive and thrive.
4. SAVE TAXPAYERS' MONEY
By applying a variety of privatization techniques to state services, infrastructure, facilities, enterprises, and land, comprehensive state privatization programs can reduce program costs.Over 100 studies have documented cost savings from contracting out services to the private sector. Cost savings vary but average between 20 and 40 percent, depending on the service. For some services, such as prison construction and operation, savings are generally less, while for others, such as asphalt resurfacing, savings are often greater. Competitive bidding whenever possible and careful government oversight are crucial to sustained cost savings.States can also realize large one-time windfalls from the sale or lease of state infrastructure and facilities. Moreover, privatization can put an end to subsidies to previously government-run operations.Privatization also creates a steady stream of new tax revenues from private contractors and corporations who pay taxes and license fees, while state units do not.
5. INCREASE FLEXIBILITY
Privatization gives state officials greater flexibility to meet program needs. Officials can replace the private firm if it isn't meeting contract standards, cut back on service, add to service during peak periods, or downsize as needed.
6. IMPROVE SERVICE QUALITY
A number of surveys have indicated that public officials believed service quality was better after privatization. In a survey of 89 municipalities conducted in 1980, for example, 63 percent of public officials responding reported better services as a result of contracting out.If competitive bidding is instituted for a service, service quality can improve even if the service is retained in-house. The reason is simple: competition induces in-house and private service providers to provide quality services in order to keep complaints down and keep the contract.Service quality is not assured, however, by privatization. Contracts must be well-designed with performance standards that create incentives for high quality service. Furthermore, diligent monitoring of the contractor's performance through customer surveys and on-site inspections must also be performed by government in its oversight role.
7. INCREASE EFFICIENCY AND INNOVATION
Private management can significantly lower operating costs through the use of more flexible personnel practices, job categories, streamlined operating procedures, and simplified procurement.Private ownership can stimulate innovation. Competition forces private firms to develop innovative, efficient methods for providing goods and services in order to keep costs down and keep contracts. These incentives, for the most part, do not exist in the public sector.
8. ALLOW POLICYMAKERS TO STEER, RATHER THAN ROW
Privatization allows state officials to spend less time managing personnel and maintaining equipment, thus allowing more time to see that essential services are efficiently delivered.
9. STREAMLINE AND DOWNSIZE GOVERNMENT
Privatization is one tool to make bureaucracies smaller and more manageable. Large private corporations often sell off assets that are underperforming or proving too difficult to manage efficiently. Under new owners and leaner management, such divisions often receive a new lease on life. Entrepreneurial governments can replicate this experience.
10. IMPROVED MAINTENANCE
Private owners are strongly motivated to keep up maintenance in order to preserve the asset value of the investment in the facility. Public owners often defer maintenance due to political considerations, increasing overall long-term costs.
Lastly in place like Assam , some zero performing departments like irrigation department should shutdown immediately and should start privatization in all non performing departments.