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Q. Niti Aayog on disinvestments of PSU’s: Discuss the recent report of NITI Aayog on roadmap for closure and strategic sale of government stake in some public sector units.
Jun 17, 2016 Related to : GS Paper-3

Ans :

In news-

With objective to bring reforms in PSU’s, recently NITI Aayog has submitted its report to PMO a roadmap for closure and strategic sale of government stake in some public sector units.

Introduction-

Earlier central government has asked NITI Aayog to prepare a roadmap for ailing public sector undertakings. Recently it has submitted two separate lists of state-run companies, one comprising of sick PSUs which may be closed down and the other a list of firms which should be privatised.

Key features of the report-

  • NITI Aayog in its report has advised the government to go for an aggressive round of disinvestment in public sector undertakings is more significant for its timing than its intent.
  • The report have sought the winding up of 26 public sector companies, leasing out of loss-making hotels and revival-linked strategic stake sales in the perennially troubled Air India and 21 other companies.
  • The report wants the government to let go off management control in companies where state stakes are already at 60% or below.

Why disinvestments in PSU’s?

  • Presently government is bearing huge financial burden from loss making PSU’s. Hence there is need of disinvestment to ensure government gets rid of non-viable public sector enterprises as huge amount of money is sinking into these companies.
  • Instead of reviving non strategic loss making PSU’s, government must wind sick PSU’s because the government’s monetary and manpower resources are needed in a whole lot of other areas which involve the delivery of public goods.
  • Similarly the atmosphere for disinvestment is more benign in India now, then earlier. Even NITI Aayog report said that disinvestment in PSU’s is more significant for its timing than its intent.
  • Presently India is the world’s fastest growing major economy and global investors, sovereign wealth funds wants to be partner in India’s growth story.
  • Due to various market-friendly policy measures and good monsoon forecast India can expect higher investment appetite. This in turn will infuse huge money in government’s treasury.

Challenges-

  • Trade unions, opposition parties and state governments opposes such proposal of disinvestments for various reasons. Bringing all stakeholders is one of the difficult tasks.
  • Each of these loss making PSU’s have its own peculiar issues, which may discourage private investments.

Conclusion-

Government has already set disinvestment target of Rs 56,500 crore for current fiscal year. Of this, Rs 36,000 crore is to come from minority stake sale in PSUs and Rs 20,500 crore from strategic sale. Government is investing lots its fiscal and manpower resources in maintaining these loss making PSU’s. Hence by winding sick units and making disinvestments in other non strategic PSU’s government can utilise its fiscal and manpower resources in serving the public good, where it is most needed.


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