Essays

Decentralization can be defined as "the dispersion of decision making governance or distribution of functions and powers from a central authority to regional and local authorities."

There are various forms of decentralization; and privatization is a type of decentralization. Privatization and deregulation means shifting responsibility for functions from the public to the private sector. Privatization can range from public-private partnerships to allowing private enterprises to perform functions that had previously been monopolized by government. Usually, though not always, privatization and deregulation are accompanied by economic liberalization and market development policies.

Due to India's size and diversity, decentralization is very important for the country's growth. From the first central initiative to establish local governments in 1957 to the amendments in constitution that established mandatory provisions for decentralization-the concept of decentralization is not new to the country. The subsequent State and Municipal Acts created'a policy conducive to decentralized governance, and these are being strengthened through devolution of resources, such as centrally sponsored schemes and financial grants to states and local governments.

India's fiscal deficit during 1990s, spectacular growth by economies of Korea, Taiwan, Malaysia due to the indulgence of private sector; integration of world trade, changes in China and dissatisfaction with the performance of public sector-all factors collectively contributed to the initiation of privatization in India.

To begin with, in 1992, India opened up cellular and basic services to private players and then the Telecom Regulatory Authority of India (TRAI) was constituted in 1997 as an independent regulator in this sector. Till 1986, telecommunication was a public utility owned by the Government of India. Mahanagar Telephone Nigam Limited (MTNL) was created in 1986 as a Public Sector Enterprise (PSE) to facilitate telecommunication services in the cities of Delhi and Mumbai. In all other places, Bharat Sanchar Nigam Limited (BSNL) was formed as a PSE on October 1, 2000 as a telecom service provider. These state-owned incumbents with a large existing subscriber base dominate the fixed line service. However, with the entry of private players, today the Indian telecommunication industry is the world's fastest growing industry with 826.93 million mobile phone subscribers, as of April 2011 as liberalization led to the entry of private players such as Bharti Airtel, Reliance Communications, Tata Teleservices, Idea Cellular and Aircel.

Privatization of banks began in 1994 when the Reserve Bank of India issued a policy of liberalization to license limited number of private banks, which came to be known as New Generation tech-savvy banks. Prior to this, SBI was in existence since 1955, apart from the Reserve Bank of India (RBI) established in 1935, which controlled the central banking responsibilities. Thus, Global Trust Bank was the first private bank after liberalization, which was later amalgamated into Oriental Bank of Commerce (OBC), and Housing Development Finance Corporation Limited (HDFC) was the first bank to receive an 'in principle' approval from the RBI to set up a bank in the private sector. At present, there are many private banks in India including leading banks like ICICI Banks, ING Vysya Bank, Jammu & Kashmir Bank, Karnataka Bank, Kotak Mahindra Bank, SBI Commercial, Dhanalakshmi Bank, Federal Bank, HDFC Bank, Karur Vysya Bank, UTI Bank and YES Bank.

Privatization of Insurance sector in India happened around the year 2000 when the government allowed private players to enter the Indian market. Although in the year 1993, a road map for privatization of the life insurance sector was laid, but it took another six years before the enabling legislation to pass the Insurance Regulatory and Development Authority Act in the year 2000. Resultantly, the newly appointed insurance regulator— Insurance Regulatory and Development Authority (IRDA)— started issuing licenses to private life insurers. At present leading private sector life insurers are SBI Life Insurance, Metlife India, ICICI Prudential, Bajaj Allianz, Max New York Life Insurance, Sahara Life Insurance, Tata A1G, HDFC Standard Life, Birla Sunlife, Kotak Life Insurance, Aviva Life Insurance, Reliance Life Insurance, ING Vysya, Shriram Life Insurance, Bharti AXA, Future General!. IDBI Fortis Life Insurance, AEGON Religare and Star Union Dia-ichi Life Insurance Co. Ltd.

In the electricity sector, the new wave of policy reforms designed to promote private participation has been driven by the need to expand the capacity and increase the reliability of systems, public sector budget constraints, and the positive results of the private participation in other countries. Although in India electricity sector is still largely under the domain of public sector, but the inclusion of private sectors for capacity additions has also begun. Major PSUs involved in the generation of electricity include National Thermal Power Corporation (NTPC), Damodar Valley Corporation (DVC), Ncitional Hydroelectric Power Corporation (NHPC) and Nuclear Power Corporation of India (NPCI). Besides PSUs, several state-level corporations are also involved in the generation and intrastate distribution of electricity. In the private sector, major capacity additions are planned in Reliance Energy. Tata Power and RPG Group-CESC. The total installed capacity in India is calculated to be 145,554.97 mega watts, out of which 75,837.93 mega watts (52.5%) is from State, 48,470.99 mega watts (34%) from Centre, and 21,246.05 mega watts (13.5%) is from Private sector initiative.

Education, health care and petroleum are some of the other sectors that have been decentralized and are among the fastest growing sectors of the economy today. Thus. decentralization of public sector enterprises that began with the economic reforms of the 1990s has yielded tangible benefits to the country.