Union Cabinet clears new divestment policy

Union Cabinet clears new divestment policy

The Union Cabinet cleared the new policy for Public Sector Enterprises (PSEs) last week. A broadsheet for disinvestment is expected to be announced by Finance Minister Nirmala Sitharaman in the Union Budget.

The Cabinet Committee of Economic Affairs cleared the Public Sector Enterprises (PSE) policy, said sources.

The policy was announced as part of the "Atmanirbhar Bharat" initiative in May 2020 by Finance Minister Nirmala Sitharaman.

The Finance Minister had then said that a list of strategic sectors requiring the presence of PSEs in the public interest would be notified. Sitharaman had said that in strategic sectors, at least one enterprise would remain in the public sector but the private sector will also be allowed. In other sectors, PSEs will be privatised.

To minimise wasteful administrative costs, the number of enterprises in strategic sectors will ordinarily be one to four. Others will be privatised,merged or brought under holding companies, Sitharaman had said.

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The new policy is expected to push disinvestment, whether minority or strategic sale (selling the entire stake or a larger slice with management control). There are over 200 Central PSEs out of which only 55 are listed. This gives an opportunity for minority stake sale and gets the Central Public Sector Enterprise (CPSE) listed on stock exchanges besides smaller stake sale in listed CPSEs. At the same time, many CPSEs, listed or unlisted, can be sold strategically.

With the government having a hard time collecting taxes, especially direct taxes, disinvestment can mobilise resources for various schemes. The government can use the proceeds for infrastructure spending.

For the current fiscal, the government hopes to raise Rs 2.10 lakh crore from disinvestment. This includes Rs 1.20 lakh crore from stake sale in CPSEs and Rs 90,000 crore from stake sale in Life Insurance Corporation (LIC) and IDBI Bank. So far in the current fiscal, the government has managed to realise only Rs 17,957 crore.

Also read: What is strategic about divestment?

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