In the budget 2016, the Government has proposed strategic sale or strategic disinvestment of PSEs for reviving them as well as to mobilize fund form the sale of shares of PSEs. In the near future, the strategic sale route where a considerable proportion of the shares of a PSE is transferred to a private sector investor will be adopted. This is another form of restructuring the PSEs just like the disinvestment route.
The government has made a target of Rs 20500 crore revenue from strategic sale during 2016-17. On the other hand, disinvestment target is Rs 56500.
Strategic sale was a method of privatization many years back, but was not adopted over the last ten years. The disinvestment commission has defined strategic sale: "Strategic disinvestment would imply the sale of substantial portion of the Government shareholding of a central public sector enterprise (CPSE) of upto 50%, or such higher percentage as the competent authority may determine, along with transfer of management control."
The idea for strategic sale comes from the government’s policy for a comprehensive approach for efficient management of Government investment in CPSEs. Various programmes like addressing issues such as capital restructuring, dividend, bonus shares, etc. will be made as part of this policy.
As a matter of change, the Department of Disinvestment is being re-named as the ‘Department of Investment and Public Asset Management (DIPAM)’.
What is NITI Ayogs’s role in strategic sale?
After budget 2016, the Finance Ministry has empowered the NITI Ayog to advise the Government on strategic disinvestment of CPSEs. It will do the following functions with regard to strategic sale.
- It will identify the CPSEs for strategic disinvestment.
- It will advise the government on mode of sale and percentage of shares to be sold; and
- It will suggest methods for valuation of the CPSE.
The above responsibility of the NITI Ayog means it has to initiate the process of strategic disinvestment of CPSEs.
The budget has given power to the NITI to identify public sector companies for strategic sale. In June 16. 2016, the NITI has prepared a report on CPSEs and suggested 32 PSUs for strategic sale including CPSEs. It has also suggested the winding up of 26 CPSEs out of the total 74.
What is the role of DIPAM in strategic sale?
After the NITI Ayog’s suggestions, Department of Investment and Public Asset Management (DIPAM) is finalizing a model for strategic sale of shares of PSEs.
Earlier the government has approved the proposal of DIPAM for laying down the procedure and mechanism for strategic disinvestment of Central Public Sector Enterprises (CPSEs). Hence, the procedure for strategic sale will be prepared by DIPAM.