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Topic: Prospects of Disinvestment

It was in the year 1998-99, when Prime Minister Shri Atal Bihari Vajpayee made a
statement in parliament about disinvestment â "Disinvestment/Privatization is the
only reason for ills of loss making public sector undertakings." And soon the re
sponse from the opposition was "You can't sell the family silver to meet your da
ily expenditure."
Disinvestment, sometimes referred to as divestment, refers to the use of a conce
rted economic boycott, with specific emphasis on liquidating stock, to pressure
a government, industry, or company towards a change in policy, or in the case of
governments, even regime change. In simple words, it involves the conversion of
money claims or securities into money or cash.
The term was first used in the 1980s, most commonly in the United States, to ref
er to the use of a concerted economic boycott designed to pressure the governmen
t of South Africa into abolishing its policy of apartheid.
Disinvestment is important in present due to the prevalence of an increasingly c
ompetitive environment, which makes it difficult for many PSUs to operate profit
ably. This leads to a rapid erosion of value of the public assets making it crit
ical to disinvest early to realize a high value.
Funds got from disinvestment are used for financing the fiscal deficit, social
welfare, to improve the performance of PSUâ S which make them able to face competi
tion and from this funds government also starts new projects which create emp
loyment opportunity for common man.
In the whole process of disinvestment in India in time duration of 1990 - 2008-0
9,10; 91 companies so far have been disinvested.
The objective of this study is to understand disinvestment, used different app
roaches for disinvestment, trends in disinvestment, causes and benefits from dis
investment in India & impact of disinvestment on PSUs which includes the case st
udy of Maruti Suzuki before and after Disinvestment.