DISINVESTMENT OF PUBLIC ENTERPRISE

Define : It refers to the dilution of the stake of the government in the

equity of the public sector units so as to transfer the ownership rights in private hands.

Objectives of Disinvestment :

To provide fiscal support to the government through financial resources raised by sale of government stake. To improve efficiency of public enterprise.

The manner of disinvestment can be :

Offering share to the private sector units at pre-decided price. Sale of block equity through auctions to pre-determined clients.

DISINVESTMENT POLICY & PRACTICE IN INDIA

The disinvestment process in India began in 1991-92 as a part of economic reforms. Government sold some shares of public enterprise from its holdings for Rs. 3,038. crore.

This was a disinvestment in the nature of sale of minority shares. Such minority share continued till 1999-2000.
But this policy was changed with the establishment of department of disinvestment in 2000-01 which was later converted into ministry of disinvestment.

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The new policy was to go in for strategic sale of public sector enterprise.

The separate ministry was created and sales were organized through auctions to avoid interference of respective ministries and bypass the stock markets. Every effort was made to ensure transparency at all stages of the disinvestment process, to avoid controversy and allegations of corruption.

STRATEGIC SALE :
It is defined as a sale of equity by the government where the management control of the enterprise is handed over to the strategic partner. Among the strategic sales under the disinvestment policy, some important companies were government stake was sold are ITDC Hotels, VSNL, Maruti Udiyog, etc.

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How ever this practice was discontinued since 2006. It ha snow been revised. The economic survey 2008-2009 estimate disinvestment to the extent of Rs. 25,000 crore in 2009-10. Strong views are expressed against disinvestment. It is viewed as anti people, anti poor and anti labour policy measure in Indian Economy.