Free Essays for Competitive Exams-Government Disinvestment in Central Public Sector Enterprises

Government Disinvestment in Central Public Sector Enterprises

Disinvestment of minority shares in Central Public Sector Enterprises (CPSEs) has become an important source of raising resource for the Government.  The policy of ‘disinvestment’ in CPSEs has evolved over the years.  Disinvestment of government equity in CPSEs began in 1991-92 following the Industrial Policy Statement of 1991, which stated that the Government would divest part of its holdings (minority share-holding) in select CPSEs.

           

Current Policy on Disinvestment

The current Government policy on disinvestment envisages people’s ownership of CPSEs while ensuring that the Government equity does not fall below 51% and Government retains management control.  Keeping this objective in view of disinvestment policy, the Government has adopted the following approach to disinvestment:

1. Already listed profitable CPSEs (not meeting mandatory shareholding of 10%) are to be made compliant by ‘Offer for Sale’ (OFS) by Government or by the CPSEs through issue of fresh shares or a combination of both.
2. Unlisted CPSEs with no accumulated losses and having earned net profit in three preceding consecutive years are to be listed.
3. Follow-on public offers (FPO) would be considered in respect of profitable CPSEs having 10 percent or higher public ownership, taking into consideration the needs for capital investment of CPSE, on a case by case basis and Government could simultaneously or independently offer a portion of its equity shareholding in conjunction.
4. Since each CPSE has different equity structure; financial strength; fund requirement; sector of operation etc., factors that do not permit a uniform pattern of disinvestment, disinvestment will be considered on merits and on a case-by-case basis.
5. CPSEs are permitted to use their surplus cash to buy-back their shares; one CPSE may buy the shares of other CPSEs from the Government.

Disinvestment in Loss Making CPSEs

            The Board for Reconstruction of Public Sector Enterprises (BRPSE) has been mandated to examine loss-making/sick CPSEs for revival/restructuring for their turnaround and advise the Government on disinvestment/closure/sale in full or part, in respect of chronically loss-making/sick CPSEs that cannot be revived.  As such if efforts to revive fail and the Government decides for privatization, then the Department of Disinvestment will take up such cases for strategic sale.