What is disinvestment? What are the salient features of the current disinvestment policy?

An important part of the economic reforms launched in the early 1990s was the reform package introduced for the public sector. Many of the defective working features of the PSEs (Public Sector Enterprises) were set to be corrected through reforms. Strategic sale of PSEs, giving more freedom to the management of PSEs, and disinvestment etc. were the main reform measures.

But of all these, disinvestment was the widely adopted instrument of the PSE package. Disinvestment was undertaken for PSEs aiming at mobilizing money and inducting private corporate oriented business practices in their administration. Disinvestment targets were set under each budget.

What is disinvestment?

Literally, disinvestment means selling of assets. Here, in the case of PUSs, disinvestment means Government selling/ diluting its stake (share) in Public Sector Undertakings in which it has a majority holding. Disinvestment is carried out as a budgetary exercise, under which the government announces yearly targets for disinvestment for selected PSUs.

What are the Salient features of Current Disinvestment Policy?

The policy of disinvestment has evolved since the early 1990s and now (bduget 2016), the government has brought some changes including bringing back strategic disinvestment (previously strategic sale). Budget 2016 has brought several notable changes including renaming of Department of Disinvestment as Department of investment and Public Asset Management (DIPAM). As per the latest policy, disinvestment now covers two types: (1) disinvestment through minority stake sale and (2) strategic disinvestment. Following are the main features of the current disinvestment policy.

(a) Public Sector Undertakings are the wealth of the Nation and to ensure this wealth rests in the hands of the people, promote public ownership of CPSEs;

(b) In the case of disinvestment through minority stake (share) sale in listed CPSEs, the Government will retain majority shareholding, i.e. at least 51 per cent of the shareholding and management control of the Public Sector Undertakings;

(c) Strategic disinvestment by way of sale of substantial portion of Government shareholding in identified CPSEs up to 50 per cent or more, along with transfer of management control.

The government also separately mentioned disinvestment targets under the two types: disinvestment target for the current financial year is Rs. 56,500 crore comprising Rs. 36,000 crores from disinvestment of CPSEs and Rs. 20,500 crores from “Strategic Disinvestment”.

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