Disinvestment public sector units pdf

The department of disinvestment should speed up the process of identification and finalization of the cases for disinvestment. In accordance with the disinvestment policy of the central government, the state governments also have initiated disinvestment programme for state level public undertakings as most of the Sepses are sick and having incurred huge cumulative loss.

Many a times, the government had to cancel the proposals of disinvestment due to lack of bidders, political pressures and poor response of investors due to a series of scams in share market. The disinvestment programme could not get proper momentum because of the policy of selling minority stakes and keeping majority stake and control of the entity with the government. In view of this situation, disinvestment policy was modified in which gave emphasis on strategic sales through which the management control is transferred to the strategic partner i.

This clearly indicates that disinvestment of the PSUs is not only for releasing government funds but for improving the quality, productivity and competency of Indian industries by means of privatization. The Central government is expecting realizations through investments to the tune of Rs. This indicates that the Government is determined and committed to speed up the disinvestment programme in spite of difficulties in the way. The disinvestment department expected Rs. However the government could realize hardly Rs.

Table-1 One of the reasons of slow progress of disinvestment programme in India is lack of suitable environment. There has been continuous opposition to disinvestment and privatization by a large section of workers and politicians.

In a sizeable number of disinvestment cases, the government had to incur loss due to improper valuation of government held stocks and assets. Disinvestment — a critical issue Disinvestment has been a critical issue in India since its inception.

It has become a political issue rather than an economical. The government had sold the shares of Rs. In this regard the advice made by Dr. He had advised the government not to sell the shares and assets of the PSUs through discretionary and non-transparent procedures, which invite allegations of corruption and nepotism.

He further advised that the sale proceeds should not be used for financing budget deficits and retiring national debts. Batra Hospitality Group had purchased the hotel for Rs. The disinvestment and privatization are opposed by workers as there has been continuous reduction in workforce through various separation schemes. For instance, SAIL reduced its workforce from 1, 83, to 1, and 47, i. In order to get the maximum benefits out of increasing share prices; the government should accelerate the process of disinvestment in case of non-strategic PSUs.

It is noteworthy that the Sensex has shown a historical growth from point in October to plus points in November The central government is the biggest gainer as it could generate wealth of Rs. The proceeds thus received and its utilization should be made public. There is a need to evolve a realistic and scientific valuation method for valuating stocks and assets held by the government.

The Department of Disinvestment, the Disinvestment Commission, the Cabinet Committee and SEB1 should have proper co-ordination and co- operation which is imperative for gaining best results from disinvestment. Disinvestment and privatization are being criticized by political parties for one or another reason.

The government should make consensus on disinvestment cases and seek cooperation of opposition parties. There should be efficient and effective publicity of disinvestment proposals and marketing of government-held stocks and assets.

The government should use the realized funds for social welfare directly benefiting the public on large scale. Unemployment problem has reached to serious proportions. Firstly, the government should create social security fund for giving relief to unemployed workforce. Secondly, self-employment schemes should be promoted on large scale to absorb the growing workforce. The programme of disinvestment and privatization should be implemented in such a manner that it would strengthen our capital market and bring investment opportunities to the investors.

The second way in which disinvestment in a public enterprise can be made is selling a part of the Government stake to a strategic private company. A strategic company is one which has a strategic interest in the public enterprise and has a capability to run it efficiently. The strategic buyer can be chosen by inviting tenders from the private companies. Thirdly, the Government can offer for sale its shares of a public enterprise to the general public through the stock-market intermediaries.

Finally, sale of a certain number of Government shares in a public enterprise can be made through auction of shares among a selected number of private firms. The reserve price of shares of a company for auction can be determined with the help of merchant bankers. Accordingly, as a part of the economic reforms policy, the Government has started reforms in public sector enterprises.

Those public sector enterprises which are potentially viable have to be restructured and revived. There is a need for evolving a fair, transparent and equitable procedure for disinvestment in selected public sector enterprises.

The achievement made with regard to disinvestment of Public Sector Undertakings which started in , are given in Table For the year , the Government set the target of Rs.

The per cent of Government equity sold and the money received from its sale of different Public Sector Undertakings are given in Table This table also gives which private company has purchased the equity of Government and at what price. The pace of public sector disinvestment greatly quickened in the year In government equity worth Rs.

Simply put, it means that the Government, instead of offloading a minority percentage of its equity in market either at home or abroad, chooses to sell blocks of shares, usually more than 26 per cent of its stake, to an investor ideally having a strategic interest in the company. This is accompanied by the transfer of management control.

This has worked wonders. Not only have a wide range of companies been disinvested, but they have reaped handsome dividends for the Government as well see Table Importantly, a mere 14 companies were involved in these sell-offs.

Compare this with Rs. The strategic sales approach to public sector disinvestment during , and 03 was quite successful. In this way they hoped to mop up huge funds. The Government believed that with the public issue of profitable public sector companies, the capital markets which were in depressed mode at that time would also revive.

It was argued that by offloading Government stake in profitable Public Sector Undertakings PSUs in the market, it will not only revive the capital market but also strengthen the financial position and liquidity of the public sector companies. Various public sector companies made public offer for sale of a part of government equity.

As a result of this Rs. The names of various public sector companies which made disinvestment through public sale and the proceeds realised by them are given in Table Disinvestment through the public offer route has been attempted in other countries, such as Britain where the aim was to widely disperse shares.

Companies like British Airports Authority were per cent privatised through this route. They were then run by professional managements. Thus in India the Government can continue with a high stake in the PSUs and make a very large public offer to ensure a widely dispersed holding of equity capital of these companies. However, if the objective is that the management should change, then a strategic sale is a more viable option in Indian conditions.

However, some analysts are skeptical of this strategy of public offer route to disinvestment. According to them, true disinvestment and privatisation would not take place if Government control and management of the public sector companies continue after public offer to retail investors.

True disinvestment and privatisation occur when the companies are controlled and managed by the private professional managers. However, in our view, professional managers can be appointed even in public enterprises controlled by government.

In fact, through public sale of equity, profitable public sector companies can raise resources through the capital market. An important issue before UPA government was to clarify its policy towards public sector disinvestment. As a part of Common Minimum Programme CMP , it was decided that public sector companies which were making profits would not be privatised though they could raise resources from the capital market. Though Finance Minister Pranab Mukherjee was silent in his budget for , he made the statement to this effect in the Parliament on July 14, In defence of such disinvestment through a part sale of government equity and issue of IPO by PSUs would enable the people to have a partial ownership of state-run units.

UPA government pledged to devolve full managerial and commercial autonomy to successful, profit-making public sector companies operating in a competitive environment. All privatisation will be considered on a transparent and case by case selective basis. The Government has delegated enhanced financial and operational powers to the Navaratnas and Miniratnas and other profit-making central public sector enterprises CPSE.

In addition to professionalising the Board of Directors of CPSE, it has also issued the guidelines to them on corporate governance While every effort will be made to modernize and restructure sick public sector companies and to revive sick industries, chronically loss-making firms will either be sold off or closed after all workers have got their legitimate dues and compensation.

The government will induct private industry to turn around companies that have potential for revival. The proposals for revival of 26 Central Public Sector enterprises and closure of two have been approved by the Government.

The total assistance approved by the Government up to Dec. In when Mr. He called them navaratnas. Due to stiff opposition from the left, the UPA government put the disinvestment process in profit- making enterprises on hold. However, Maruti Udyog Ltd was permitted to raise resources from the market through sale of some government shares in the market in Feb. Maruti Udyog succeeded in raising Rs. Automatically changes to Flash or non-Flash embed.

WordPress Embed Customize Embed. URL: Copy. Presentation Description No description available. Disinvestment: Disinvestment Disinvestment is a process in which the public undertaking reduces its portion in equity by disposing its shareholding.

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