Government of India introduced four major reforms in the public sector in its new Industrial
Polity, 1991, which were as follows
(i) Dereservation In the Industrial Policy Resolution 1956, 17 industries were reserved for the
public sector. In 1991, only 8 industries were reserved for the public sector. They were restricted to the areas of atomic energy, arms and ammunition, defence, mining and railways. This meant that the private sector could enter all areas except these eight (now three since 2001) giving competition to public sector. •
(ii) Disinvestment of Public Sector Enterprises Disinvestment involves the sale of the equity shares to the private sector and the public. This was done with an aim to raise funds and encourage wider participation of the general public and workers in the ownership of these enterprises. This was expected to result in improved managerial efficiency and financial discipline.
(iii) Policy Regarding Sick Units All public sector units were referred to the Board of Industrial . and Financial Reconstruction (BIFR) to decide whether a sick unit was to be restructured or
closed down. A National Renewal Fund (NRF) was set up by the government to retrain or redeploy labour retrenched from a sick unit and to provide compensation to public sector employees seeking voluntary retirement.
(iv) Memorandum of Understanding Management of public sector units was granted greater . autonomy, but held accountable for specified results through signing of Memorandum of
Understanding (MoU) between the particular public sector unit and their administrative ministries. Under this system, public sector units were given clear targets and operational autonomy for achieving those targets.