Disinvestment Policy of the Government of India

Government policy on disinvestment consists of :
  1. Strategic Disinvestment/Privatization and
  2. Minority Stake Sale in CPSEs
  1. Strategic Disinvestment implies entire or substantial sale of Government shareholding of a CPSE along with transfer of management control. In case of Privatization, which is a sub-set of strategic disinvestment, the Government equity in CPSE and its management control is transferred to a private strategic buyer(s) and in other cases of strategic disinvestment, the Govt. equity is transferred to another CPSE along with control.
  2. Minority Stake Sale in certain CPSE's are carried out without transfer of management control through various SEBI-approved methods like Initial Public Offer (IPO), Offer for Sale (OFS), Buyback of shares etc. These methods play important role in strengthening the capital market through:
    1. Increasing the float of well performing CPSE's
    2. Providing opportunity to retail investors to participate in an extended range of stocks and
    3. Increasing liquidity and depth of the capital market
The New Public Sector Enterprise (PSE) Policy for Atma Nirbhar Bharat, which also provides overall guidance on strategic disinvestment, was notified on 4th February, 2021 with the approval of Cabinet. The policy intends to minimize the presence of Government in the PSEs across all sectors of economy.

The New PSE policy delineates four Strategic sectors based on the criteria of national security, energy security, critical infrastructure, provision of financial services and availability of important minerals. Bare minimum presence of the existing public sector commercial enterprises at Holding Company level will be retained under Government control in the strategic sectors. The remaining will be considered for privatization or merger or subsidiarization with another PSE or for closure. All PSEs in non-strategic sectors shall be considered for privatization, where feasible, otherwise such enterprises shall be considered for closure. However, the policy does not apply to certain classes of public sector entities such as Not-for-profit companies, or CPSEs providing support to vulnerable groups, or having developmental/promotional roles etc.

The Department of Public Enterprises has prepared guidelines (13 December 2021) to operationalize the New Public Sector Enterprise policy which inter-alia provides for the identification of the CPSEs either for closure or privatization in the non-strategic sectors in consultation with the concerned Administrative Ministries/Departments, NITI Aayog, Department of Expenditure and DIPAM.

Further, the Cabinet, in its meeting held on 18.05.2022 had given approval for empowering the Board of Directors of the Public Sector Enterprises (PSEs) to recommend and undertake the transactions for Disinvestment (both strategic disinvestment and minority stake sale) or closure of any of their subsidiaries or units or sale of stake in JVs. It was also approved that based on proposal of Board of CPSE and Administrative Ministry, DIPAM will obtain an " in-principle" approval of Alternative Mechanism. Thereafter, the Board of CPSEs can undertake the process of disinvestment or closure of subsidiaries/units/JVs based on DIPAM or DPE guidelines.