Privatization, the buzzword under the NDA government, has been largely appreciated by the intelligentsia. At the same time, there was criticism too, especially at the resale of Hotel Centaur Mumbai to Sahara India Group at Rs. 115 cr, just after six months of disinvestment and sale to Batra Hospitality Pvt. Ltd., at Rs. 83 cr. Similarly, Tatas' attempt to divert Rs. 1200 plus cr from the corpus of VSNL to Tata Teleservices Ltd., has put a big question mark on the rationality of the decision. The disinvestment process was adopted by the Government of India in the year 1991 mainly to fill the lacuna in the ability of the government to run the Public Sector units profitably, which in turn added to the burden of the exchequer. In the process, the profit-making companies were also put on the block. There is a need to properly analyze the profit history of a PSU compared to that of the private companies in the same industry and to see how best the problem of loss or decrease in profit of PSU's over the years can be combated before rushing into disinvestment. The policy also needs revision on the basis of lessons learnt from previous experiences of disinvestment.

The intervention of Public sector units (PSUs) was earlier considered crucial for economic growth and rapid industrialization. At the time of Independence, it was felt that political independence in absence of economic self-reliance would be injurious to the country's sovereignty and autonomy. To gain the economic independence the then Prime Minister Late Pandit Jawaharlal Nehru embarked upon establishing modern industries. Some decades ago, the trend was to nationalize the private sector industries. Considering the deficiencies, in the later years, Indira Gandhi nationalized some private sector industries, significantly Coal and Banking industries (Singh, 1999). Policy on the public sector has been guided by the Industrial Policy Resolution 1956 and 1991, which gave public sectors, a strategic role in the economy. The objectives behind huge investment in PSUs were: