Strategic Disinvestment

• 07 Oct 2019

The Department of Investment and Public Asset Management (DIPAM) under the Ministry of Finance has been made the nodal department for the strategic stake sale in the Public Sector Undertakings (PSUs).

• Till now, PSUs for strategic sale were identified by NITI Aayog. From now, DIPAM and NITI Aayog will jointly identify PSUs for strategic disinvestment.
• Also, DIPAM secretary would now co-chair the inter-ministerial group on disinvestment, along with the secretary of administrative ministries concerned.
• This has done with a view to streamlining and speeding up the process, reducing the role of administrative ministries which often used to place hurdles in the path of major stake sales.

Department of Investment and Public Asset Management

• The Department of Disinvestment was one of the Departments under the Ministry of Finance. It was renamed as Department of Investment and Public Asset Management (DIPAM) from 14th April, 2016.
• The mandate of the Department is as follows:
  
  • All matters relating to the management of Central Government investments in equity including disinvestment of equity in Central Public Sector Undertakings.
  • All matters relating to the sale of Central Government equity through offer for sale or private placement or any other mode in the erstwhile Central Public Sector Undertakings.

Strategic Disinvestment

• Disinvestment means the dilution of stake of the Government in a public enterprise.
• Strategic disinvestment is transferring the ownership and control of a public sector entity to some other entity (mostly to a private sector entity).
  
  • Unlike the simple disinvestment, strategic sale implies some sort of privatization.
• According to the government, strategic disinvestment would imply the sale of a substantial portion of the Government shareholding of a central public sector enterprises (CPSE) of upto 50%, or such higher percentage as the competent authority may determine, along with transfer of management control.
• Strategic disinvestment in India has been guided by the basic economic principle that the government should not be in the business to engage itself in manufacturing/producing goods and services in sectors where competitive markets have come of age, and economic potential of such entities may be better discovered in the hands of the strategic investors due to various factors, e.g. infusion of capital, technology up-gradation and efficient management practices etc.

NITI Aayog

• The National Institution for Transforming India, also called NITI Aayog, was formed via a resolution of the Union Cabinet on 1^st January 2015.
• The Government of India constituted the NITI Aayog to replace the Planning Commission instituted in 1950.
• It is the premier policy ‘Think Tank’ of the Government of India, providing both directional and policy inputs.
• While designing strategic and long term policies and programmes for the Government of India, NITI Aayog also provides relevant technical advice to the Centre and States.
• The Governing Council of NITI, with the Prime Minister as its Chairman, comprises Chief Ministers of all States and Lt. Governors of Union Territories (UTs).

Source: BS