The sale of Air India and BPCL would have served as a shot in the arm for the government’s Rs 1,05,000 crore disinvestment target budgeted for FY20. As of now, it looks highly unlikely that the strategic sale of these assets will be completed in the current fiscal. The next Budget for 2020-21, to be presented on February 1, will have another target for disinvestment.
So, what exactly is a strategic sale and how is it different from disinvestment. A lowdown:
What is strategic disinvestment or strategic sale?
When the government decides to transfer the ownership and control of a public sector entity to some other entity, either private or public, the process is called strategic disinvestment. The Department of Investment and Public Asset Management (DIPAM) which comes under the Finance Ministry defines Strategic disinvestment as follows: “Strategic disinvestment would imply the sale of a substantial portion of the Government shareholding of a central public sector enterprises (CPSE) of up to 50%, or such higher percentage as the competent authority may determine, along with transfer of management control.”
What was said about strategic disinvestment in Budget 2019-20?
The Finance Minister in her Budget 2019-20 speech had stressed on the government’s aim to continue strategic disinvestment of select CPSEs. She had said, “In view of current macro-economic parameters, Government would not only reinitiate the process of strategic disinvestment of Air India but would offer more CPSEs for strategic participation by the private sector.” A target of Rs 1,05,000 crore of disinvestment receipts for the financial year 2019-20 was set, this included strategic disinvestment and other disinvestments as well. Of this, the government according to the DIPAM website has achieved just Rs 18, 094.59. None of this came from strategic disinvestment. According to the government, the resources unlocked by the strategic disinvestment of CPSEs would be used to finance the social sector/developmental programmes of the Government benefiting the public. It is expected that the strategic buyer of various CPSEs will bring in new management along with investment for the growth of the companies which would help their development.
What are some of the CPSEs put up for strategic sale?
The Cabinet Committee on Economic Affairs has approved strategic disinvestment of various CPSEs. Some of the include; Bharat Petroleum Corporation Ltd. Air India and its five subsidiaries and one JV Shipping Corporation of India Ltd. Container Corporation of India Ltd. Hindustan Prefab Limited Pawan Hans Ltd. Scooters India Limited Bharat Pumps & Compressors Ltd Bharat Earth Movers Ltd Cement Corporation of India Ltd Alloy Steel Plant, Durgapur; Salem Steel Plant; Bhadrawati units of SAIL Indian Tourism Development Corporation (ITDC) Hindustan Petroleum Corporation Limited.
What is the difference between strategic disinvestment/sale and disinvestment
Selling minority shares of Public Enterprises, to another entity be it public or private is disinvestment. In this, the government retains ownership of the enterprise. On the other hand, when the government sells majority shares in an enterprise, that is strategic disinvestment/sale. Here, the government gives up ownership of the entity as well. Government carefully choses enterprises to be put up for sale.
Source: Economic Times