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Disinvestment of equity shares in public sector undertaking

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  1. Abstract
  2. Introduction
  3. Meaning of disinvestment
  4. Criteria for disinvestment
  5. Objectives of disinvestment
  6. Disinvestment strategy
  7. Disinvestment process
  8. Merits and demerits of disinvestment process
  9. Conclusion
  10. Reference

Public sector undertakings (PSUs) are companies established by the central government under the Companies Act or as statutory corporations under specific statues of parliament. PSUs were established in the early 1950s for rapid industrial and economic growth, to create necessary infrastructure, for employment generations, to promote balanced regional development and to assist the growth of other industries. In 1950s 58 industries were reserved for the public sector undertakings, which was brought down to 18 in 1991 and now it is 4. There are 35 PSUs in the BSE-200 index accounting for almost two-fifth of market capitalization, with an aggregate market capitalization of Rs. 3,84,600 crore.

[...] In the disinvestment process maintained above, the ?Department of Disinvestment' is assisted, at each stage by ?Inter Ministerial Group' comprising officers from the ?Ministry Of Finance' Department of Public Enterprises, The Administrative Ministry, Department controlling PSUs (Department Of HR and PE)and Officers of Department of Disinvestment and Advisors. CONCLUSIONS The studies on Disinvestment of public sector undertakings have revealed the following conclusions: 1. There is no clear-cut framework or policy for disinvestment in India The entire proceeds of disinvestment are been used to mitigate the gap fiscal deficit instead of using them for development of social sector & building infrastructure The government has not been concentrating on the timing of disinvestment as a result most of the private sector investors are shying away form the process because of the unattractive offers made by the government There is no transparency in the entire process of disinvestment in India The government has done a little or more so failed to attract foreign suitors for the disinvestment process in India. [...]

[...] Offer of Shares This measure involves partial sale of equity ownership at fix price by book building process. Closure or Sale of Asset In Case, there is no ?investor interest' in the company, the commission is of the view that there would be no option but to close down the operations of the company and liquidate all its assets and liabilities. MERITS OF DISINVESTMENT PROCESS The disinvestment process is advocated for the following reasons: The basis problem with PSUs is neither the quality of assets nor the skilled manpower, but the overall decision making system. [...]

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