August 06, 2020
The Indian Government is completing the Stake Sale process of 23 PSUs undertakings whose Disinvestment has already been cleared by the cabinet. The Government wants to sell the stakes at a time when it fetches the right price.
For the Fiscal Year, 2020-21 government has set a target of Rs 2.10 lakh crore where 1.20 lakh crore will come from disinvestment of public sectors undertakings. And 90000 crore from stake sale in financial institutions.
- Disinvestment is the process of Government or organisations selling liquidate assets or subsidiaries.
Post-independence, the public sector industries were established to enable the Government to take the necessary steps to regulate industrial development, and the objectives were as follows:
- To maintain a continuous increase in the growth of core sectors of the economy such as shipping, gas, steel, oil.
- Promoting a balanced regional development across various states.
- They are generating employment opportunities.
- Exporting promotion.
In 1948 the telecom giant ITI, independent India’s first public sector undertaking was established. Disinvestment in India began in 1991-92, and 31 PSU’s were disinvested for Rs 3038 crore. In 2016 the department renamed itself as Department Of Investment And Public Asset Management. And thus it became the nodal department for the strategic stake sale in PSU.
Why Government is undertaking the Disinvestments
– The target is to contain the Fiscal deficit of the Government.
– The PSU’s are no longer profitable as they are facing competition from private companies working in the same sectors.
– If the PSU’s are not disinvested at an appropriate time, then many of them will become sick.
– Many of them were of outdated technology and are not exactly competitive.
– Currently, the Government needs money rather than investing for modernising and reviving unprofitable PSU’s.
The company named BALCO was disinvested in 2001 despite of earning profits but was disinvested due to its old technology, and the mines were even exhausted.
The entry of various PSUs like Reliance with the retail business of oil, Bharat Petroleum Corporation Limited might not remain attractive in future and thus making it disinvesting is highly profitable.
Privatisation is the best for the Indian economy to push forward its growth trajectory, as it is facing massive slowdown from GDP of 6% to 4%. Banks can be privatised more conveniently because of digitalisation in the physical presence of banks in rural and remote areas. It is a great matter of concern to allow foreign companies for bidding, which is a significant dilemma as foreign investors could bring many profits.
Written By- Mousami Jena
Image Source; Google