Disinvestment of Public Sector Enterprises

Why in news?

• In the Union Budget 2023-24, the government has set a disinvestment target of Rs 51,000 crore, down nearly 21% from the budget estimate for the current year and just Rs 1,000 crore more than the revised estimate. It is also the lowest target in seven

About Disinvestment:

• The disinvestment process involves the sale of government stake in public sector enterprises to strategic or financial buyers, either through the sale of shares on stock exchanges or through the sale of shares directly to buyers.
• The proceeds from the disinvestment are used to finance various social and infrastructure projects and to reduce the government's fiscal deficit.

Approaches:

• Minority Disinvestment:
  • The government retains a majority in the company, typically greater than 51%, thus ensuring management control.
• Majority Divestment:
  • The government hands over control to the acquiring entity but retains some stake.
• Complete Privatisation:
  • 100% control of the company is passed on to the buyer.

Process followed:

• In India, the disinvestment process is conducted by the Department of Investment and Public Asset Management (DIPAM), which comes under the Ministry of Finance.
• The primary objective of DIPAM is to manage the government's investments in public sector enterprises and to oversee the disinvestment of government equity in these enterprises.
• Government had constituted the National Investment Fund (NIF) in 2005 into which the proceeds from disinvestment of Central Public Sector Enterprises were to be channelized.

What is the Disinvestment Plan in 2023-24?

• The Centre is not going to add new companies to the list of CPSEs to be divested in 2023-24.
• The government has decided to stick to the already-announced and planned privatisation of State-owned companies.
• These include IDBI Bank, the Shipping Corporation of India (SCI), the Container Corporation of India Ltd (Concor), NMDC Steel Ltd, BEML, HLL Lifecare, and so on.

PRACTICE QUESTION:

Consider the following statements:

1. The proceeds from disinvestment of Central Public Sector Enterprises are channelized into National Investment Fund (NIF)

2. Ministry of Commerce is the nodal ministry for disinvestment of Central Public Sector Enterprises in India.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Answer