Updated on 14 September, 2019
The Narendra Modi government has decided to go for strategic disinvestment of 23 Public Sector Undertakings (PSUs) this year.
What is strategic disinvestment?
- The move in 2019-20 is estimated to bring about ₹1,05,000 crore.
- In recent years, the proceeds from the sale of shares of public sector enterprises is contributing substantially to the government’s receipts in the budget.
- For example, in 2017-18, the government got around Rs 1.05 lakh crores from disinvestment. For 2019-20, the government’s target is Rs 90000 crores.
Recent changes in the process of strategic disinvestment
- It is the transferring of ownership and control of a public sector entity to some other entity (mostly to a private sector entity).
- It is the sale of a substantial portion of the Government shareholding of a central public sector enterprise (CPSE) of up to 50%, or such higher percentage as the competent authority may determine, along with transfer of management control.
Role of the Alternative Mechanism
- In the past, the NITI Ayog and the ‘Department of Investment and Public Asset Management (DIPAM)’ used to play a critical role in the process of strategic disinvestment.
- NITI Ayog selected the PSEs and advised the government regarding this.
- And the procedure for strategic sale used to be prepared by DIPAM.
- But in March 2019, the government transferred most of the decision-making power to the Finance Minister led Ministerial panel called Alternative Mechanism (AM).
- The objective was to speed up the process of strategic disinvestment.
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- The AM is led by the Finance Minister and includes Road Transport Minister (Nitin Gadkari) and the minister representing the administrative department concerned.
- Formed in 2017, the AM’s role was limited to setting the terms and conditions of strategic disinvestment.
- But now most of the decisions on disinvestment are made by the body such as the number of shares to be sold, the mode of sale and the final pricing of the transaction, etc.
- The AM also designs the principles/guidelines on pricing of shares, the selection of strategic partner/buyer, and the terms and conditions of the sale.
- They also decide when and where the sale will take place.