Privatization of strategic sectors

Following is a generic conceptual question- with regards to privatizing certain strategic sectors like Defence and Railways- often government maintains the stance that it is technically not "Privatizing" the aforesaid sector(s). This is because the ownership is separated from operations/management. Question is- as an investor, its a natural expectation to find place in ownership (eg- Member of Railway board etc) and to take strategic decisions that will impact his investment and see to it that he gets rich dividends- how can we expect huge investments by industrialists if we deny them a place in ownership?

ya it has a little logic.. but still its a "given" condition that the strategic areas cant be compromised. in the huge departments like defence and railways ,we can say the operation and maintainenace itself is an industry and investors can experience windfall gains just bcoz of its sheer size! so we cant say government is not prudent in promoting the investors in these departments. whatever happens, its the given condition. we cant modify that. Now that this O&M investments is a very welcoming step for the development and a win-win situation in this area.

how investors manage to invest without having ownership, evoked my curiosity and hence asked ma'am. Coming from a common sense perspective- investors like being in control of organizations via ownership

why not! dont we see 'n' number of investors in india running only the operation and maintainece industries.

yes ma'am they do. But if the same ops and maintanence are ancillary to a parent company?

ok amar tell me whats meant by investment and an investor?

An investor is a person who puts a sum of money in an organization. the sum of money is known as investment.

but what do you mean by ownership?

there are investors in primary market and secondary market. I may be wrong, but ideally every person who puts in money would ideally be a stakeholder. but technically - not every investor can participate in board meetings and strategise the future direction

even if those O&M are ancillary industries , they have their own shares in those ancillary industries.

But ma;am if we speak of Railways- its not a corporation;its a deparmental undertaking. Can they procure public money?

yup! Ok now tell me. take an expample: there is a municipality called 'X' and there is a sewage treatment plant and the design,operation , maintainence everything is outsourced. now who is the owner for that sewage plant?

Municipality

So who is the guy who is designing, and also doing O&M part?

Private agency. Who gets its share on contract basis.

Technically he is the "investor" right?

Contractor is the investor who is investing money right? Without investing any money how will he run the project?

Ok take another example of toll roads. Contractors are laying roads. But who is the ultimate owner of the road?

Government

No stake does not mean that he is not investor. I think the reason for your confusion is bcoz you have a mental picture in your mind that, people who holds shares are only investors. The contractor has to lay the roads with his own money only. Is he not investing? Not necessarily one needs to hold a share for investing. The capital that you are putting up initially is investments. Indeed if you read the contracts of toll road and see, they will have all these "profit and loss" clauses.

So toll road is laid by some contractor by investing money. He is the investor. But the final owner of the land is the government not the contractor. He is an intermediary. Still he sees windfall gains of hundreds of crores in a project .That’s it. The same example you can apply for railways also!