PSUs-Strategic-Sale-IASToppers
Video Summary

[RSTV The Big Picture] PSUs: Strategic Sale

The government proposes to raise Rs 1.05 lakh crore from disinvestment in the current financial year. To fulfil this goal, Centre gave in-principle approval for the strategic disinvestment of the government shareholding in five public sector enterprises, along with management control.
By IT's Video Summary Team
December 06, 2019

Content

  • Context
  • What is Disinvestment?
  • History of Disinvestment in India
  • What are the benefits of disinvestment?
  • What are the challenges?
  • Way Forward
  • Conclusion

[RSTV The Big Picture] PSUs: Strategic Sale

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Context

Five public sector units (PSUs),

Five public sector units (PSUs), including majority stakes in the oil company Bharat Petroleum Corp Ltd (BPCL) and Shipping Corporation of India, have been lined up for disinvestment by the government. 

What is Disinvestment?

  • Disinvestment is the action of an organization or government selling or liquidating an asset or subsidiary. Disinvestments are primarily motivated by the optimization of resources to deliver maximum returns.
  • In the Indian context, disinvestment is aimed at reducing the financial burden on the government due to inefficient PSUs and to improve public finances. It introduces competition and market discipline and helps to depoliticise non-essential services.

History of Disinvestment in India

History of Disinvestment in India

 What are the benefits of disinvestment?

Following are the benefits that each major stakeholder may achieve:

benefits of disinvestment

What are the challenges?

the challenges

Suggestions

  • There has to be a timeline, structure and framework in which companies have to be identified and put out for disinvestment.
  • Along with disinvestment, monetisation of PSU assets can also be an alternate option. This can also unlock money for developmental work. Additionally, there has to be a strategy and time-bound plan to implement monetisation efforts.
  • The above two efforts will add to the economic momentum and help lead to the 5 trillion dollar economy goal to be achieved by 2024.
  • Conduct roadshows to identify and attract likely investors.

Conclusion

The government is turning out to be most reformist as long as disinvestments are concerned. History has shown us that the strategic sale has worked for the company and that is the best way forward as far as the economy is concerned. The government`s decision to go for a sale of certain PSUs is the step in the right direction. Several more PSUs are ripe for the picking. However, we need to proceed with the sale in a time-bound manner.

 

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