Advantages (a) Increase in efficiency: Privatization is 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 in profits. (b) Professional management: Government owned enterprises make poor economic management compared to private owned enterprises. This is because of the fear of negative publicity.
Private ownership makes bold management decisions due to their strong foundation at international level. (c) Increase in competition: Privatisation of state-owned monopolies occurs alongside deregulation i.e. policies to allow more firms to enter the industry and increase the competitiveness of the market. It is this increase in competition that can be the greatest spur to improvements in efficiency.
(d) Reduction in economic burden of Government: Since the ownership, control and management of many PSUs are transferred to private, the burden and responsibility of government has comparatively reduced.