DIVINVESTMENT POLICY
OF THE GOVERNMENT
In this presentation, we will delve into the
government's disinvestment policy,
examining its goals and effects, different
methods employed and case studies of
successful disinvestment. We will also look
at the criticism of the policy and its future
prospects and challenges.
What is the
Disinvestment Policy?
Definition
-The process by which the Government of India
reduces its stake in Public Sector Undertakings
(PSUs) and encourages private participation.
Objectives
-Providing fiscal stability, efficient use of
capital, and better resource allocation. It
also aims to unlock the value of state-owned
assets and create competition.
Methods of Disinvestment
Used by the Government
Public Offer
Selling equity shares to the public or
through domestic and international
institutions
Strategic Sale
Transferring the management
control of PSU to a private
entity.
Buyback of Shares
Repurchasing the shares of the
PSU from the market and
extinguishing them
Exchange Traded Fund (ETF)
Pooling together PSU stocks, and then
selling the shares of the fund in the
stock market. It offers investors a
diversified portfolio of PSU shares
Impact of Disinvestment on the
Impact of Disinvestment
Economy on the
Economy
Positive
Positive Negative
-Reduces the government's debt
• Reduces the andlead
• May fiscal
to deficit
-Improves the operational
government's debt efficiency of the PSU
retrenchment of PSU
-Encourages deficit in theemployees
competition
and fiscal industry
• May lead to setting
Negative
• Improves the up of monopolies in
operational some industries
-Mayefficiency
lead to retrenchment
of the of PSU employees
-MayPSUlead to setting up of• May lead to in some
monopolies
concentration of
• Encourages
industries wealth and loss of
-Maycompetition in the
lead to concentration jobs
ofinwealth
certain and
industry regions
loss of jobs in certain regions
Criticism of
Disinvestment Policy
Opposition Allegations
Opposition parties have claimed that the
policy is against the interest of the country
and will lead to loss of jobs.
Security Concerns
Selling shares of PSUs to
foreign entities may pose
security risks as control over
critical public assets goes to
a foreign country.
Corporatization of Power
Disinvestment may lead to
the corporatization of
power and the creation
of a "corporate Raj" that
influences policy
decisions
Case Studies of Successful
Disinvestment
Tata Consultancy Services (TCS)
A stake of 5.6% was sold to raise around $1.2 billion.
As of 2021, TCS is one of the most valuable companies
in India with a market capitalization of over $180
billion.
Mahanagar Telephone Nigam limited (MTNL)
Government disinvested its shares of 10.5%. It was a
successful move, executed during the 2004 market
boom, that saved the company from a loss-making
position and returned the government ₹1,133 crore
($152 million).
Bharat Petroleum Corporation Limited
(BPCL)
The government approved the sale of its
53.29% stake in BPCL in 2019. The
estimated value of disinvestment was
around $11 billion. It will be one of the
largest strategic sales undertaken by
the government.
Future Prospects and
Challenges for Disinvestment
Reducing Fiscal Deficit
The disinvestment target for FY22 is ₹1.75
trillion ($24 billion), which will help in
managing the fiscal deficit of the country.
Political Challenges
The government will face political
resistance while executing the
disinvestment process, which will lead to a
delay in achieving the target.
Management of PSU Assets
PSUs that are strategic in nature
need to be managed well to avoid
further damage to the economy.
THANKS
FOR YOUR
KIND
ATTENTION
NAME – MANYA ANAND
CLASS – 11TH
SECTION – C
ROLL NO. – 32
SUBJECT – ECONOMICS
