DEFINITION

Disinvestment Is A Process In Which The Public Undertaking

Reduces Its Portion In Equity By Disposing Its Shareholding.
As Per SEBIs Guidelines, Disinvestment Means The Sale By
The Central Government OR State Government, of Its Shares
OR Voting Rights OR Control, In PSUs. The Disinvestment
Reduces Government Participation In The Company.

What is the Difference Between

Privatization & Disinvestment.?
Privatization Means Allowing The Private Sector To Set Up More And
More Industries That Were Previously Reserved For Public Sector.
Privatization Is The Process Of Transferring The Ownership Of A
Business Of A Public Sector To The Private Sector.
Disinvestment Refers To Sale From The Government, Partly OR Fully,
Of A Government-Owned Enterprise.

Why Disinvestment Need ?

The Indian economy had virtually embraced bankruptcy during the
period of 1980-92.
In 1991, there was 236 operating public sector undertakings, of which
only 123 were profit making.
The top 20 profit making PSUs were responsible for 80 percent of
profits.
The return on public sector investment for the year 1990-91 was just
over 2 percent.

Process of disinvestment
Disinvestment Commissions Recommendations.
Consideration by Core Group of Secretaries on Disinvestment (CGD)
Approval of Cabinet Committee on Disinvestment
Appointment of Legal Advisor and Asset Valuer.
Advertisement for inviting bidders.
Short-listing of bidders.
Finalization of Shareholders Agreement/ Share Purchase/ Other agreements etc.
Receipt of final bids and bid evaluation.
CCD, Securities Exchange Board of India and other regulatory approvals.
Execution of legal documents and inflow of funds Public offer announcement by
the strategic Partner, as per SEBI takeover Code, wherever applicable.

OBJECTIVES
To Improve Performance of Units.

To Reduce Budgetary Deficits.

To Overcome The Problem of Political Involvement in PSUs.
To Overcome The Problem of Corruption.
Enable The Government To Concentrate On Social Development.

TYPES OF DISINVESTMENT
Minority Disinvestment

Majority Disinvestment
Complete Privatization

Disinvestments-A Historical Perspective

Period from 1991-92 to 2000-01
31 PSUs Were Disinvested for Rs.3,038 Cr. in 1991-92.
The Disinvestment Commission Formed In August 1996 Chaired by G
V Ramakrishna.
Target of Rs. 54,300 Cr. to be Raised From PSU Disinvestment From
1991-92 to 2000-01, The Government Managed to Raise Just Rs.
20,078 Cr.
Later On Renamed As Ministry of Disinvestment From September,
2001.

Period From 2001-02 to 2003-04

This Was The Period When Maximum Number of Disinvestments Took
Place.
BHARAT ALUMINIUM CO.LTD.
CMC LTD.
INDIAN PETROCHEMICALS CORP.LTD
MODERN FOOD INDUSTRIES (INDIA) LTD
MARUTI SUZUKI INDIA LTD.
INDIA TOURISM DEVELOPMENT CORP.LTD.(18 HOTEL
PROPERTIES)
Target of Rs. 38,500 Cr. to be Raised From PSU Disinvestment, The
Government Managed to Raise Rs. 21,163.68 Cr.

Period From 2004-05 to 2008-09

PSU Disinvestment Remained a Controversial Issue Through This
Period.
As a Result, The Disinvestment Agenda Stagnated During This Period.
In The 5 Years From 2003-04 To 2008-09, The Total Receipts From
Disinvestments Were Only Rs. 8515 Cr.

2009-10 Onwards
The Government Started The Process By Selling Minority Stakes
In Listed And Unlisted (profit-making) PSUs.
NHPC Ltd.
Oil India Ltd.
NTPC Ltd.
National Mineral Development Corporation Ltd.
Coal India Ltd. etc. Through Public Offers.
Disinvestment Activity Has Slowed Down In 2011.
As Against a Target of Rs.40,000 Cr. For 2011-12, The
Government Was Able To Raise Only Rs.14,000 Cr.

Company

BHEL
NBCC
ONGC
MOIL LTD.
COAL INDIA LTD.

POWER GRID CORP.OF INDIA LTD.

ENGINEERS INDIA LTD.
SJVN LTD.
NMDC LTD.
RURAL ELECTRIFICATION CORP.LTD.
OIL INDIA LTD.
NHPC LTD.

SHIPPING CORP.OF INDIA LTD.,THE

POWER FINANCE CORP.LTD.

Demerits of Disinvestment
Result In Loss of Regular Source of Income To The
Government.
Leads To Concentration of Power.
Monopoly of Private Sector.
Employees of PSUs would lose jobs.
The Loss of PSUs Is Rising. It Was 9305 Cr. In 1998 And
10060 Cr. In 2000.

National investment fund

On 27 January 2005, the Government had decided to constitute
a 'National Investment Fund' (NIF) into which the realization
from sale of minority shareholding of the Government in
profitable CPSEs would be channelized. The Fund would be
maintained outside the Consolidated Fund of India.

Do you know
PSUs constitute 19% of the total market capitalisation of companies
listed at BSE.
VSNL was the first PSU to be divested by way of a Public Offer in
1999-00.
ONGC Public Offer in 2003-04 has been the largest ever PSU FPO,
raising Rs. 10,542 Cr.
Coal India Public Offer in 2010-11 has been the largest ever PSU
IPO, raising Rs. 15,199 Cr.
In 11 recent PSU Offerings (NTPC, PFC, PGCI, REC, NHPC, OIL,
SJVN, CIL, MOIL, PSB and NBCC), the government has made an
overall gain of Rs. 1,50,415 Cr. over the issue price (as on 31 August
2014) since their listing dates.

Sectors restricted from

disinvestment
Strategic Sectors Are Excluded From The Part of Disinvestment.
Nuclear.
Defense.
Railways.

References

http://www.divest.nic.in/
http://www.bsepsu.com/
http://www.worldbank.org/
http://www.divest.nic.in/Recent.asp/