JOIN USEconomic Survey 2022: How the disinvestment policy has evolved over the years
The idea of disinvestment, an annual exercise where the government sets a disinvestment target for select PSUs, was first introduced in the 1991 interim Budget by the then Finance Minister Manmohan Singh as the country was moving towards a more liberal, global and private sphere.
Disinvestment or divestment can be defined as the government's action of selling or liquidating its stake in a public sector unit asset or subsidiary. This is done when PSUs start turning into liabilities and start showing a negative rate of return, in turn putting pressure on the government resources. In such cases, disinvestment helps bring down the financial burden being imposed by inefficient PSUs on the public finances, raise money and put the proceeds to better use.
The government had last year approved a policy of strategic disinvestment of public sector enterprises that provided a clear roadmap for disinvestment in all non-strategic and strategic sectors. The guideline for implementation of new public sector enterprise policy for CPSEs was notified on December 13, 2021.
After the 1991 reforms, there was a transition in thinking about the public and private sector, the Economic Survey 2022 pointed out.
"The term ‘disinvestment’ was used first time in Interim Budget 1991. However, the policy on disinvestment gathered steam under the Government of PM Vajpayee, when a new Department of Disinvestment was created in 1999, which became a full Ministry in 2001... The process of disinvestment continued intermittently over the next decade 2004-2014," the Survey stated.
Since 2016, the government has given ‘in-principle’ approval for strategic disinvestment of 35 CPSEs and/or subsidiaries/units/joint ventures of CPSEs and IDBI Bank. "In order to realise the mission of New, Self-reliant India, there was a need to redefine public sector participation in business enterprises and to encourage private sector participation in all sectors,” the Survey said.
Stating that there has been an emphasis on disinvestment in the last five years, the Survey said that after 2014, the disinvestment policy was renewed with stake sales in PSEs such as Hindustan Petroleum Corporation Ltd (HPCL), Rural Electrification Corporation Ltd (REC), Dredging Corporation of India Ltd (DCIL), Hospital Services Consultancy Corporation Ltd (HSCC), National Projects Construction Corporation Ltd (NPCC), THDC India Ltd and North Eastern Electric Power Corporation Ltd.
New Public Sector Enterprise (“PSE”) Policy for Atmanirbhar Bharat was notified on February 4, 2021. The policy intends to minimise the presence of the government in the PSEs across all sectors of the economy, the Survey said.
Besides, there have been successful listing of PSEs like IRCTC, HUDCO, Cochin Shipyard Ltd, General Insurance Corporation, New India Assurance Company Ltd, Mazagon Dock Shipbuilders Ltd (MDL) and RailTel on the stock market.
So far, the government has received Rs 9,330 crore (as on January 24, 2022) from disinvestment of CPSEs through Offer for Sale (OFS) route and sale of shares through the stock exchange. The Economic Survey also said the CPSE stocks have gained traction among investors.
The government earlier this month handed over ownership rights in national carrier Air India to Tata Group for Rs 18,000 crore. The amount includes the takeover of the debt burden of Rs 15,300 crore and another Rs 2,700 crore in cash. "This progress on privatisation of Air India is particularly important, not only in terms of garnering disinvestment proceeds but also for boosting the privatisation drive," the Survey said.
This is the first privatisation in 20 years and will pave the way for the sale of more CPSEs, which are lined up for sale -- BPCL, Shipping Corporation, Pawan Hans, IDBI Bank, Concor, BEM and RINL.
(With DH/agency inputs)
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