Essays

The policy of disinvestment in India has largely evolved through tin policy statements of Finance Ministers in their Budget Speeches. In the Interim budget 1991-92, it was announced that Government would dives up to 20 per cent of its equity in selected Public Sector Undertaking! (PSUs) in favour of mutual funds, financial and institutional investor! in public sector. In the budget speech of 1992-93, the cap of 20 per cent was reinstated and the list of eligible investors was enlarged to include FIIs, employees and OCBs. In April 1993, Rangrajan committee recommended to divest up to 49 per cent of PSE's equity for industries explicitly reserved for the public sector and over 74 per cent in other industries.    But the Government did not take any action on recommendations.

In the Budget Speech 1996-97, as per the Common Minimum Programme (CMP), the setting up of Disinvestment Commission for 3 years was announced. CMP also emphasized to add more transparency to disinvestment process and examine the non core areas of public sector. In the Budget Speech of 1998-99, it was announced that Government  shareholding in Central Public Sector Enterprises (CPSEs) would by brought down to 26 per cent on case to case basis, excluding strategic CPSEs where Government would retain majority shareholding,      

In order to protect the interest of workers in all cases, the j Government classified the PSEs into strategic and non strategic areas in March 1999. Il was decided that Strategic PSEs would be those in areas of arms and ammunition, atomic energy and railway transport. All other PSEs were to be considered non strategic. In 1999-2000 Budget Speech it was announced that Government will continue to strengthen the strategic units and privatizing the non-strategic ones through gradual disinvestment or strategic sale and devise viable rehabilitation strategies for weak units.

The 2000-01 Budget Speech focused on restructure and revival of table CPSEs; close down PSEs which cannot be revived; bring down government shareholdings in non-strategic CPSEs to 26 per cent or ower, if necessary; and protection of the interest of workers. It was announced that the receipts from disinvestment will be used for social.    sectors, restructuring of CPSEs and for retirement of public debt. The motu statement 2002 gave specific aim to the disinvestment policy: .1(1011 and up gradation of PSEs, creation of new assets, . generation of employment and retiring of public debt. In the Budget, speech for 2003-04, Government announced details regarding the setting , 'I Disinvestment Fund and Asset Management Company to hold,  and  dispose the residual holdings of Government. However, with the change in the Government in 2004, there was a change in the "i.iok of Disinvestment policy also.

In May, 2004, Government adopted National Common Minimum Programme, which outlined the policy of Government with respect to public sector. It said the Government pledged to devolve full managerial control and commercial autonomy to successful, profit-making companies operating in competitive environment and they would not be privatized.  It said ‘Navratna’ companies can raise resources from the capital market And efforts will be made to modernize and restructure sick Public sector Companies. It favoured sale of small proportions of Government equity   Through IPO/FPO without changing the character of PSEs. In regard To this, approved listing of unlisted profitable CPSEs subject to residual equity the Government remaining at least 51 per cent and Government  retining the control of management.

In January 2005, the Government approved in principle listing of The then unlisted profitable CPSEs each with a Net Worth in excess of   Rs.200. crore, through an Initial Public Offering (IPO), either in  conjunction with a fresh equity issue by the CPSE concerned or  independently by the Government, on a case by case basis. The sale of minority shareholding of the Government in listed, profitable CPSEs either in conjunction with a Public Issue of fresh equity by the CPSE concerned or independently by the Government was also approved. The government also constituted a National Investment Fund (NIF), into which the proceeds from disinvestment of CPSEs were to be channelized.  75 per cent of annual income of NIF was to be used to finance selected social sector schemes relating to education, health, and employment and the rest 25 per cent to meet the capital investment requirements of profitable and revivable CPSEs. Subsequently, the Government decided, In principle, to list large, profitable CPSEs on domestic stock exchanges And to selectively sell small portions of equity in listed, profitable CPSEs Other than me navratnas.

The current policy on disinvestment was articulated in paragraph 14 of President's Address to Joint Session of Parliament on 4th juke, 2009.

It said the Government develops a roadmap for listing and people ownership of public sector undertakings while ensuring that government’s equity does not fall below 51 per cent. This policy was reaffirmed the Budget Speech of July 2009. The Speech clearly stated that public  sector enterprises such as banks and insurance companies will rema in the public sector and will be given all support, including capital infusion, to grow and remain competitive.

In November 2009, the Government approved an action plan f disinvesting Government equity in profit making Central Public Sector Undertakings (CPSUs). According to the action plan, already listed profitable CPSUs, not meeting the mandatory public shareholding of I per cent are to be made compliant. All CPSUs having positive net worth no accumulated losses and having earned net profit for the preceding consecutive years are to be listed through Public Offering! out of Government shareholding or issue of Fresh Equity by the company or a combination of both. Also, the proceeds from disinvestment would be channelized into National Investment Fund and during April 200 to March 2012 would be available in full for meeting the capital expenditure requirements of selected social sector programmes decide by the Planning Commission / Department of Expenditure. The stats quo ante is to be restored from April 2012.                     

Some of the notable disinvestments done by the Government I actual order are domestic offerings of CONCOR and VSNL; capita reduction and dividend from BALCO; Strategic sale of MFIL; Sale o KRL, CPCL and BRPL to CPSEs; Strategic sale of BALCO and LJM( Strategic sale of CMC, HTL, VSNL, IBP, PPL, hotel properties o ITDC and HCI, slump sale of Hotel Centaur Juhu Beach, Mumbai an< leasing of Ashok Bangalore; Special dividend from VSNL, STC sou MMTC; sale of shares to VSNL employees; Strategic sale of HZL IPCL, hotel properties of ITDC, slump sale of Centaur Hotel Mumba Airport, Mumbai; Premium tor renunciation of rights issue in favour of SMC ; Put Option of MFIL; Sale of shares to employees of HZl and CMC; Strategic sale of JCL; Call Option of HZL; Offer for Salt of MUL, IBP, IPCL, CMC, DCI, GAIL and ONGC; Sale of shares or ICI Ltd.; Offer for Sale of NTPC and spill over of ONGC; sale of shares to IPCL employees; Sale of MUL shares to Indian public sector financial institutions and banks and employees and sale of PGCIL and REC shares through Offer for Sale.