Industrial Sector (Part – IV)

Total Questions: 50

11. Which one of the following modes of privatization is the most comprehensive and complete? [I.A.S (Pre) 1993]

Correct Answer: (d) Transferring ownership and management to the private sector.
Solution:The most comprehensive and complete mode of privatization is divestment. Divestment refers to the transfer of ownership and management to the private sector

Objectives of Privatisation
Providing strong momentum for the inflow of FDI

  • Privatisation aims at providing a strong base for the inflow of FDI.
  • The increased inflow of FDI improves the financial strength of the economy.

Improving the efficiency of public sector undertakings (PSUs)

  • The efficiency of PSUs is improved by giving them the autonomy to make decisions.
  • Some companies were given special categories of Navratna and Miniratna.
    Ways of Privatisation
    Government companies are transformed into private companies in two ways.
    Transfer of ownership
    Government companies can be converted into private companies in the following two ways:
  • By the withdrawal of the government from the ownership and managerment of public sector companies
  • By the outright sale of public sector companies.
    Disinvestment
  • Privatisation of the public sector undertakings by selling off parts of the equity of PSUs to the private sector is known as disinvestment.
  • The purpose of the sale is mainly to improve financial discipline and facilitate modernisation.

12. Why is the Government of India disinvesting its equity in the Central Public Sector Enterprises (CPSEs)? [I.A.S (Pre) 2011]

1. The Government intends to use the revenue earned from the disinvestment mainly to pay back external debt.

2. The Government no longer intends to retain the management control of the CPSEs.

Which of the statements given above is/are correct?

Correct Answer: (d) Neither 1 nor 2
Solution:Main objectives of current disinvestment policy of Indian Government are as follows:

(i) To give participation to citizens in public sector enterprises

(ii) To maintain government control on management and to retain majority shareholding Le at least 51% in public sector enterprises.

(iii) To ensure better corporate governace in public sector enterprises.

(iv) To reduce the financial burden on the government due to inefficient PSUs and to improve public finance.

(v) To introduce competition and market discipline.

(vi) To depoliticise non-essential services.

The Government had constituted the National Investment Fund (NIF) in November, 2005 into which proceeds from disinvestment of CPSEs were to be channelized. Its main objective was to invest in projects of social sector and to finance large-scale infrastructure development.

13. With reference to the National Investment Fund to which the disinvestment proceeds are routed, consider the following statements: [I.A.S (Pre) 2010]

1. The assets in the National Investment Fund are managed by the Union Ministry of Finance.

2. The National Investment Fund is to be maintained within the Consolidated Fund of India.

3. Certain Asset Management Companies are appointed as the fund managers.

4. A certain proportion of annual income is used for financing select social sectors.

Which of the statements given above is/are correct?

Correct Answer: (c) 3 and 4
Solution:The National Investment Fund (NIF) was set up in November, 2005 for channelizing the proceeds from disinvestment of Central Public Sector Enterprises. The corpus of NIF was to be permanent in nature and NIF was to be professionally managed to provide returns to the Government, without depleting the corpus.

Selected Public Sector Mutual Funds, namely UTI Asset Management Company Ltd., SBI Funds Management Private Ltd. and LIC Mutual Fund Asset Management Company Ltd., were entrusted with the management of the NIF corpus.

As per this scheme, 75% of the annual income of the NIF was to be used for financing selected social sector schemes which promote education, health and employment. The residual 25% of the annual income of NIF was to be used to meet the capital investment requirements of profitable and revivable public sector undertakings.

During April 2009 to March, 2013, the disinvestment proceeds were utilized directly for selected social sector schemes allocated by Department of Expenditure/Planning Commission.

In January, 2013 Government decided that the disinvestment proceeds, w.e.f. 2013-14, will be credited to the existing NIF (which is a 'Public Account' under the Government Accounts) and the funds would remain there until withdrawn/invested for the approved purposes. Government reallocate the re- sources freed up through disinvestment towards other priorities, such as social sector and large-scale infrastructure development.

14. Assertion (A): Disinvestment is an integral part of liberalization of economy in India. [U.P.P.C.S. (Mains) 2002, 2004]

Reason (R): The proceeds are being used according to stated policy.

Select the correct answer using the codes given below:

Codes:

Correct Answer: (b) Both A and R are true, but R is not a correct explanation of A
Solution:Disinvestment of CPSEs is an integral part of liberalization of economy in India, which focused on the efforts required to be taken to curtail the fiscal burden of the State by reducing public sector borrowings and bring in fiscal austerity Its proceeds are being used according to the stated policy of the Government.

Government had constituted the National Investment Fund (NIF) in November, 2005 into which the proceeds from disinvestment of CPSEs were to be channelized.

The disinvestment policy has a clear objective of improving the quality of assets and skills of public sector companies At present the Department of Disinvestment has been renamed as Department of Investment and Public Asset Management (DIPAM). DIPAM deals with all matters relating to management of Central Government investments in equity including disinvestment of equity in Central Public Sector Undertakings.

The Four major areas of its work relates to Strategic Disinvestment, Minority Stake Sales, Asser Monetisation and Capital Restructuring. It also deals with all matters relating to sale of Central Government equity through offer for sale or private placement or any other mode in the erstwhile Central Public Sector Undertakings DIPAM is working as one of the Departments under the Ministry of Finance.

15. Assertion (A): The Government is resorting to disinvestment of some of the public sector units (PSUs). [U.P.P.C.S. (Pre) 2008]

Reason (R): PSUs have not generated enough employment opportunities.

Codes:

Correct Answer: (c) A is true, but R is false
Solution:The Government is resorting to disinvestment of some of the PSUs as part of economic reforms policy of liberalization and privatization, mainly due to reduce the fiscal burden and bridge the revenue shortfall of the Government.

Hence, the assertion is true but the reason given is incorrect, as it cannot be said that PSUs have not generated enough employment opportunities. In fact, PSUs have an important role in generating employment in the country. Studies have shown that PSUs have beaten the private sector in terms of employment growth in recent years.

16. Disinvestment in Public Enterprises started from which financial year? [U.P.P.C.S. (Spl.) (Pre) 2008]

Correct Answer: (b) 1991-92
Solution:1. Disinvestment in India began in 1991-92 when 31 selected PSUs were disinvested for Rs. 3,038 crores. The term 'disinvestment' was used first time in Interim Budget 1991.
2. Later, Rangarajan committee, in 1993, emphasised the need for substantial disinvestment.
3. The policy on disinvestment gathered steam, when a new Department of Disinvestment was created in 1999, which became a full Ministry in 2001.
4. Ministry of Disinvestment was formed in 2001
5. But in 2004, the ministry was shut down and was merged in the Finance ministry as an independent department.
6. Later, the Department of Disinvestments was renamed as Department of Investments and Public Asset Management (DIPAM) in 2016.
7. Now, DIPAM acts as a nodal department for disinvestment.

17. Which of the following Iron Steel Plants is not located on a riverside? [U.P.R.O./A.R.O. (Pre) 2021]

Correct Answer: (a) Bhilai
Solution:Bhilai Steel Plant (BSP) is India's largest producer and sup- plier of world class rails for Indian Railways including world's longest 130 metre rails in single piece and 260 metre long rail welded panels, and a major producer of large variety of wide and heavy steel plates and structural steel.

It was set up with the help of the USSR in 1959. It is located about 40 kms west of Raipur, the capital city of Chhattisgarh, along the Howrah-Mumbai railway line and the Great-Eastern high- way. Hence, Bhilai Iron and Steel Plant is not located on a riverside.

18. The Bhilai Steel Plant has been established with the assistance of: [M.P.P.C.S. (Pre) 1990, 1991]

Correct Answer: (d) Russia
Solution:Bhilai Steel Plant was set up with the help of the USSR (Now Russian Federation) during the Second Five Year Plan. Its first blast furnace commissioned on 4th February. 1959. It is located in Bhilai, about 40 kms West of Raipur, the capital city of Chhattisgarh. Bhilai Steel Plant has been the flagship integrated steel plant unit of the Central Public Sector steel company, the Steel Authority of India Limited (SAIL).

19. Bhilai Steel Plant is a_______enterprise. [Chhattisgarh P.C.S.(Pre) 2011]

Correct Answer: (a) Public Sector
Solution:Bhilai Steel Plant was set up with the help of the USSR (Now Russian Federation) during the Second Five Year Plan. Its first blast furnace commissioned on 4th February. 1959. It is located in Bhilai, about 40 kms West of Raipur, the capital city of Chhattisgarh. Bhilai Steel Plant has been the flagship integrated steel plant unit of the Central Public Sector steel company, the Steel Authority of India Limited (SAIL).

20. Rourkela Steel Plant was established in collaboration with: [U.P.P.C.S. (Mains) 2012]

Correct Answer: (d) Germany
Solution:Rourkela Steel Plant (RSP), the first integrated steel plant in the pubic sector in India, was set up with German (West Germany) collaboration with an initial installed capacity of 1million tonnes. Its first blast furnace inaugurated on 3rd February 1959. It is operated by the Steel Authority of India Limited (SAIL).

Steel Authority of India (SAIL) is a steel manufacturing enterprise owned and operated by the Ministry of Steel, Government of India.

Steel Authority of India can trace its origins back to the Hindustan Steel Limited (HSL) which was set up on 19 January 1954. It was intended to manage only one plant being set up in Rourkela.

For Bhilai and Durgapur Steel Plants, the preliminary work was done by the Iron and Steel Ministry. From April 1957, the supervision and control of these two steel plants were also transferred to Hindustan Steel. The registered office was originally in New Delhi. It moved to Calcutta in July 1956, and ultimately to Ranchi in December 1959.