The policy on disinvestment has evolved considerably through President’s address to Joint Sessions of Parliament and statement of the Finance Minister’s in their Budget Speeches.
The salient features of the Policy are:
Public Sector Undertakings are the wealth of the Nation and to ensure this wealth rests in the hands of the people, promote public ownership of CPSEs;
While pursuing disinvestment through minority stake sale in listed CPSEs, the Government will retain majority shareholding, i.e. at least 51 per cent of the shareholding and management control of the Public Sector Undertakings;
Strategic disinvestment by way of sale of substantial portion of Government shareholding in identified CPSEs upto 50 per cent or more, alongwith transfer of management control.
Approach for Disinvestment
(a) Disinvestment through minority stake sale
On 5th November 2009, Government approved the following action plan for disinvestment in profit making government companies:
Already listed profitable CPSEs (not meeting mandatory shareholding of 10%, which stands revised to 25%) are to be made compliant through ‘Offer for Sale’ (OFS) by Government or by the CPSEs through issue of fresh shares or a combination of both
Unlisted CPSEs with no accumulated losses and having earned net profit in three preceding consecutive years are to be listed.
Follow-on public offers would be considered taking into consideration the needs for capital investment of CPSE, on a case by case basis, and Government could simultaneously or independently offer a portion of its equity shareholding.
All cases of disinvestment are to be decided on a case by case basis
The Department of Investment and Public Asset Management (DIPAM) is to identify CPSEs in consultation with respective administrative Ministries and submit proposal to Government in cases requiring Offer for Sale of Government equity
(b) Strategic Disinvestment
To be undertaken through a consultation process among different Ministries/Departments, including NITI Aayog.
NITI Aayog to identify CPSEs for strategic disinvestment and advice on the mode of sale, percentage of shares to be sold of the CPSE and method for valuation of the CPSE.
The Core Group of Secretaries on Disinvestment (CGD) to consider the recommendations of NITI Aayog to facilitate a decision by the Cabinet Committee on Economic Affairs (CCEA) on strategic disinvestment and to supervise/monitor the process of implementation.
(c) Comprehensive management of GoI’s investment in CPSEs
The Government recognises its investment in CPSEs as an important asset for accelerating economic growth and is committed to the efficient use of these resources to achieve optimum return.
The Government will achieve these objectives by adopting a comprehensive approach for addressing critical inter-linked issues such as leveraging of assets to attract fresh investment, capital restructuring, financial restructuring, etc.
Different options for optimal utilization of Government’s investment in CPSEs will be assessed to adopt suitable investment management strategies to improve investors’ confidence in the CPSEs and support their market capitalization which is essential for raising fresh investment from the capital market for their expansion and growth.
Efficient management of investment in CPSEs shall be ensured through rationalization of decision making process for all related issues and seamless inter-departmental coordination in the matter.