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Q. Need to sell off stakes of non-strategic PSUs: Discuss the need to sell the Government stakes of non-strategic PSUs.
Dec 31, 2016 Related to : GS Paper-3

Ans :

Introduction-

The government of India had promised to disinvestment by selling certain stakes from profit-making state-owned companies that are not strategic any more. But by observing current trend the government appears to be unlikely to push ahead with its divestment plan in the current fiscal due to a sluggish market and the comfortable revenue position.

Issue-

  • Ignoring current disinvestment plan reflects the complacency and defeats the goal of boosting the performance of state-owned enterprises.
  • The stake sales (disinvestment) need not have to wait for the right level of stock prices. Large-scale disinvestment in these PSUs will help shore up their performance. 
  • Many observers argue that the government should exit from sectors such as steel and power. Because the private sector has developed technical and managerial capability to operate in these areas.

What it should do-?

  • Instead of spending time, money and resources in sectors where private sector is strong, government should foray into new advanced manufacturing sectors like microelectronics, aerospace, telecom and new generation drugs, where the private sector does not have the requisite expertise and capability.
  • There is a need of dynamic approach by the government to create companies that get into serious research and devel0pment. 
  • Hence government should also swiftly wind up loss making companies and use the money, resources garnered through reshuffling assets as capital investment to build infrastructure that the country badly needs. 

Conclusion-

In the current era of strong private sector, government should focus only on strategic and essential sectors only. Government should focus where either private sector failed to provide or strategic aspects. Hence by selling certain stakes from profit making PSU’s and also privatising loss making PSU’s, government can utilise the money and resources to build infrastructure that the country badly needs.  


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