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Guidelines issued by the Ministry of Finance for disinvestment in CPSEs

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Guidelines issued by the Ministry of Finance for disinvestment in CPSEs

Guidelines for disinvestment in Central Public Sector Enterprises (CPSEs) were issued by the Ministry of Finance.

These guidelines have been issued for the purpose of privatization, merger, closure or subsidiarisation of non-strategic CPSEs to implement the new PSU policy.

Key Provisions:

  • The Department of Public Enterprises will identify CPSEs in non-strategic sectors for closure or privatization. Also, prepare a proposal for obtaining the approval of the Cabinet Committee on Economic Affairs.
  • Once approved, the process of disinvestment or winding up of enterprises will be completed within seven months.
  • Disinvestment usually refers to the sale or liquidation of an asset or its subsidiaries as a strategic measure or as a process of raising resources.
  • Its main objectives are to reduce the financial burden on the government, enforce competition and market discipline, and encourage an expanded share of ownership.

Based on the percentage of stake sold, it is of three types:

  • Minority disinvestment: Government holds a higher stake (more than 57%), and management remains in control. For example- ONGC Ltd.
  • Strategic disinvestment: Sale of 50% or more of the government shareholding along with transfer of management control. For example- Planned sale of BPCL.
  • Full Disinvestment: Disinvestment of a higher stake too, where 100% control of the company is passed on to the buyer. Like the recent sale of Air India.

New Public Sector Enterprises (PSE) Policy

Notified in February 2021 for a self-reliant India, the new policy has classified CPSEs into strategic and non-strategic sectors. It has exempted certain CPSEs which are of non-profit nature or support vulnerable and weaker sections.

Source – The Hindu

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