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"Disinvestment in Indian Government-Owned Enterprises"



  Sep 23, 2023

Disinvestment in India


What is disinvestment in the context of Indian government-owned enterprises?

• Disinvestment refers to the sale of the government's equity stakes in public sector units (PSUs) and state-owned enterprises to private entities or the public
 

Why does the Indian government undertake disinvestment?

• Disinvestment is carried out to reduce the government's financial burden, promote efficiency and competitiveness in PSUs, and raise funds for public welfare programs.
 

What were the targets set for disinvestment in recent years, and have they been met?

• The government sets annual disinvestment targets. In recent years, targets have ranged from ₹56,000 crore to ₹1.79 trillion, with varying degrees of achievement due to market conditions.
 

What are the challenges faced in achieving disinvestment targets?

• Challenges include opposition from employee unions, delays in the decision-making process, finding the right valuation for PSUs, and market conditions affecting stake sales.
 

How does disinvestment impact the government's finances?

• Proceeds from disinvestment are considered money receipts that either create or reduce government liabilities. They contribute to reducing fiscal deficits and funding development programs.
 

Are there different methods of disinvestment?

• Yes, disinvestment can take various forms, including minority stake sales, strategic sales (full ownership transfer), and public offerings (IPOs).
 

What is the current status of disinvestment in India?

• The disinvestment process is ongoing, with the government considering various options for stake sales in PSUs such as Coal India, Rail Vikas Nigam, and BEML, among others.
 

Why has disinvestment in IDBI Bank faced delays?

• The sale of IDBI Bank's stake has faced delays due to vetting processes critical for sensitive banking sectors, including getting the Reserve Bank of India's approval for shortlisted bidders.
 

What is the outlook for disinvestment in the near future?

• The government aims to meet its disinvestment targets by prioritizing minority stake sales in listed PSUs, but timing depends on market conditions. PSUs like Bharat Electronics Limited and Shipping Corporation of India are under consideration.
 

 How does the National Monetisation Pipeline (NMP) contribute to disinvestment?

• The NMP focuses on monetizing public sector brownfield assets, unlocking their value, and generating revenue for the government, complementing the disinvestment efforts.
 

How much has been realized through disinvestment in recent years?

• In recent years, disinvestment proceeds have varied, with around ₹4.7 trillion realized since 2014. However, receipts have sometimes fallen short of the budget estimates.
 

What are the challenges and prospects for disinvestment in the banking sector?

• Challenges include the need for regulatory approvals and suitable buyers. Prospects depend on market conditions and the government's determination to exit banking businesses.
 
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