Table of Contents
IN NEWS
- Recently, the Cabinet has approved a new process of strategic disinvestment with a view to expediting privatisation of select PSUs.
- The change comes within a week of a group of secretaries agreeing for sale of government’s
- 53.29% stake in Bharat Petroleum Corp Ltd
- 63.75% stake in Shipping Corporation of India (SCI)
- 30% in Concor, 100% NEEPCO and 75% in THDC
WHAT IS THE DIFFERENCE BETWEEN DISINVESTMENT, STRATEGIC DISINVESTMENT AND PRIVATIZATION?
- In case of disinvestment, the Govt. sells share of a company for small volume (not below 51%) so that, control & management of company remains with the govt. itself.
- But strategic disinvestment involves sale of substantial volume of shares (below 51%) so that, part of the control of the company and management passes to the private shareholder.
- The strategic disinvestment fetches better price.
- But Disinvestment may or may not result in Full Privatisation.
- When the Government retains 26% of the shares carrying voting powers while selling the remaining to a strategic buyer, it would have disinvested all right but would not have privatised, because with 26 per cent it can stall vital decisions for which generally a special resolution (three-fourths majority) is required.
PRESENT METHOD FOR STRATEGIC SALE
- Presently PSUs for strategic sale are identified by NITI Aayog.
- Respective ministries used to play important role in major stake sale in PSUs.
- This led to huge bureaucratic hurdle.
NEW METHOD
- In the new policy, the Department of Investment and Public Asset Management (DIPAM) under Ministry of Finance has been made the nodal department for the strategic stake sale.
- Now DIPAM and NITI Aayog will jointly identify PSUs for strategic disinvestment.
- Also, DIPAM secretary would now co-chair the inter-minister group on disinvestment, along with the secretary of administrative ministries concerned.
- Strategic sale may involve two-stage bidding-Expression of interest (EoI) or a preliminary intent showing bid, and a final financial bid.
- Pre-bid meetings with likely bidders and roadshows to attract potential investors will form part of the process to provide clarity on every aspect of the stake sale.
- Also, data centre will be set up for bidders to look for information on the PSUs up for sale.
- The idea is to complete the stake sale within a timeframe, say 4-5 months.
WHY THIS CHANGE?
- Government has set a target of mobilising Rs 1.05 lakh crore from disinvestment proceeds.
- It has become more critical after it doled out Rs 1.45 lakh crore stimulus by way of a cut in corporate tax.
- Also, to stick to its target of keeping fiscal deficit at 3.3% in 2020.
WhatsApp