2. Privatization and Disinvestment
Privatization implies a change in ownership, resulting in a change
in management.
The privatization of public sector enterprises will occur only when
govt. sells more than 51% of its ownership to private
entrepreneurs.
Disinvestment involves dilution of govt. stake to a level that results
in a transfer of management or could also be limited to such a level
as would permit govt. to retain control over the organization.
Disinvestment beyond 50% involves transfer of management, where
as disinvestment below 50% would result in the govt. continuing to
have a major say in the undertaking.
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3.
4. Strategic sectors are excluded from the
purview of disinvestment
Nuclear
Defence
Railways.
5. Strategic Sale: govt. sells a major portion of its
stake to the strategic buyer and also gives over
the management control
Capital Market: offering shares at a fixed price
through a general prospectus, the offer is
made to the general public through the
medium of recognized market intermediaries.
Auction
Sale to Employees: VSNL part of equity sold to
employees.
6.
7.
8. Part of economic reforms of 1991
Focus on disinvestment
Auction method was widely followed
9. NDA govt. at the centre.
Maximum no of disinvestments.
Focus shifted to strategic disinvestment
Major Disinvestments
1. BALCO taken over by Vedanta Group
2. HZL
3. ITDC (18 HOTEL PROPERTIES)
4. MARUTI SUZUKI INDIA LTD.
5. MODERN FOOD INDUSTRIES (INDIA) LTD.
6. VSNL taken by Tata Group
Between 2001-1004 against an aggregate target
of Rs. 38,500 crore to be raised from PSU
disinvestment, the Government managed to
raise Rs.21,163.68 crore.
10. UPA govt.
Disinvestment through public offer encouraged.
Uncertain market conditions in the last 3 years.
Present policy : govt. to retain atleast 51 equity and managerial
control
To sell upto 5-10% equity in profit making CPSE’s
CIL
ONGC
OIL
NTPC
Disinvestments proposed this fiscal:
NMDC
NALCO
HCL
RINL
OIL
Will generate about Rs.12000 crore.
11. National Investment Fund
Set up in 2005.
Realization from sale of minority shareholding of the
Government in profitable CPSEs would be
channelised.
25% to meet the capital investment requirements of
profitable and revivable CPSEs, in order to finance
expansion.
75% of the annual income of the Fund will be used to
finance selected social sector schemes, which
promote education, health and employment.
1. MGNREGA
2. IAY
3. Rajiv Gandhi Gramin Vidyutikaran Yojana
12. Country Proceeds ($ millions)
China 1,70,736
Russia 52493
Brazil 18362
India 9611
Pakistan 7556
13. Only 0.7% of public households invest in
equities.
Disinvestment of profit making CPSE’s
1. BALCO Rs. 5.69cr TO Rs. 82.65cr
2. MUL Rs. 13cr TO Rs. 242cr
Public offer vs. auction
14. In Private Sector, the decision making process is quick
Decisions are linked with the competitive market
changes.
better corporate governance, exposure to competitive,
corporate responsibility.
Transparency.
The market participation in capital of PSUs through
stock exchanges would enable the market to discover
the latent worth of PSUs.
The Loss making PSUs can be successfully revived by
asking the strategic partner to infuse fresh capital and
exercising excellent management control over sick PSUs
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15. Loss of regular source of income to the government.
There would be chances of ‘asset stripping’ by the
strategic partner. Most of the PSUs have valuable
assets in the shape of plant and machinery, land and
buildings etc.
The Government’s Policy on disinvestment includes
the disposal of both profit making, as well as
potentially viable PSUs.
Loss of public interest.
Protests by employees- VRS.
Private monopolies: VSNL to Tata
IPCL to Reliance.
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To reduce financial burden of govt.Promote people’s ownership of Central Public Sector Enterprises.List all profitable CPSEs on stock exchanges Listing to result in: Improvement in corporate governance.Transparency and accountability. Market discipline.Unlocking true value of CPSEs to all stakeholders.
IPO first sale of equity of a company to the public by listing on stock exchange.
NIF is outside the ConsolidatedFund of India.For the last 3 years all the money is used for social development.
India lags behind all the BRIC nations.China being a communist is leading.Comes from disinvestment of major infrastructure PetroChina and financial banks ABC fetched the highest IPO in the world.
Low equity participationAuction gives maximum realisation of assets and also transaction cost and least time.Long term gains increased participation in markets.
