2. Disinvestment
The term ‘disinvestment’ is used to indicate the
process of privatisation
Privatisation is the process by which the
government transfers the productive activity from
the public sector to private sector
It involves the sale of public sector equity to the
private sector and public at large
3. Objectives of Disinvestment
To improve competitiveness and eliminate
monopoly
Reduction of public debt
To transfer the commercial risk to private
sector
To release resources locked in sick PSUs for
redeployment in high priority areas
4. Evolution of Disinvestment
Policy
New industrial policy 1991 advocated privatisation of
PSEs
Rangarajan Committee (1993)
It emphasized the need for substantial disinvestment
It stated that % of equity to be divested could be up to
49 % for industries explicitly reserved for public sector
In exceptional cases, up to 74% of equity could be
divested
5. Evolution of Disinvestment
Policy
Strategic and Non-strategic classification for the
purpose of disinvestment (1999)
Strategic industries were limited to arms and
ammunitions and related defence industries, atomic
energy, mining of minerals for atomic industries,
railways.
For the non-strategic PSEs, it was decided that the
reduction of government stake to 26% would be
worked out on a case to case basis
6. Evolution of Disinvestment
Policy
National Common Minimum Programme (2004)
All privatisations will be considered on a transparent and
consultative case by case basis
Profit making companies will not be privatised
Government will retain existing navratna companies in public
sector
Efforts will be made to restructure and revive viable sick
PSUs and unviable sick units will be sold-off or closed
It will not support the emergence of monopoly that restricts
7. Evolution of Disinvestment
Policy
National Investment Fund (2005)
It was set up to channelize the proceeds from
disinvestment of CPSEs
75% of the annual income of fund to be used
to finance selected social sector schemes-
education, health and employment
The residual 25% to be used to meet capital
investment requirements of profitable and
revivable PSUs
8. The Policy of Disinvestment
From 1999-2000 to 2003-04, emphasis was on strategic sale
of PSUs through a process of competitive bidding
The resources raised through strategic sale was Rs 6,344
crore during 1999-2004
After 2005, disinvestment realisations have been mostly
through sale of equity
The actual realisation from disinvestment over a period 1991-
92 till end March 2017 was Rs 2,47,383 crore. Of this,
realisation through sale of minority shareholding in CPSUs
was Rs 2,17,938 crore
9. Critique of Disinvestment
Undervaluation of Assets
Utilisation of money from disinvestment
Creation of private monopoly
Unemployment
