• UGI USER
  • Feb 06, 2024
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  • 1 Comments

DISINVESTMENT STRATEGY SHIFT

Focus:

  • The government didn’t set disinvestment targets in the Interim Budget for 2024-25.
  • This shift aims to adopt a broader approach to disinvestment beyond fiscal deficit management.
Source: IE

New Paradigm Highlighted:

  • Disinvestment should focus on proper public enterprise management, not just fiscal deficit reduction.
  • Strategic disinvestment and stake dilution through market listing are key strategies.
  • Administrative ministries’ reluctance to let go of PSUs is a hurdle.
  • Timeline unpredictability due to the learning curve in executing strategic disinvestment.
About Disinvestment

·    Definition: 

o    Disinvestment entails the government selling its stake in public sector enterprises to strategic or financial buyers.

o    Sales occur either through stock exchanges or direct transactions.

·    Utilization of Proceeds: Revenue generated funds social and infrastructure projects and aids in reducing the government’s fiscal deficit.

·    Approaches:

o    Minority Disinvestment: Government retains over 51% stake, ensuring management control.

o    Majority Divestment: Government cedes control while retaining some ownership.

o    Complete Privatisation: Entire company ownership is transferred to the buyer.

·    Execution: 

o    Conducted by the Department of Investment and Public Asset Management (DIPAM), under the Ministry of Finance.

o    DIPAM oversees government equity disinvestment in public sector enterprises.

o    Proceeds are channeled into the National Investment Fund (NIF), established in 2005.