DISINVESTMENT IN

PUBLIC SECTORS

What it means
Disinvestment is the sale of shares of PSU by

the Govt.
When these shares,(of govt. cos., held by the

govt. as earning assets & at the disposal of

the govt.) are sold to get cash, it is referred to
as disinvestment

Why Disinvestment?
To provide fiscal support
To improve public finances
Encourage wider share of ownwership
Help PSUs upgrade their technology
Introduce competition & market discipline
Initiate diversification & expansion
Improve efficiency of the enterprise

Disinvestment Policy-Salient
Features
Citizens have every right to own part of the

shares of PSU
PSUs are the wealth of the Nation & this
wealth should rest in the hands of the people
In order to raise resources & encourage wide
public participation, a part of govt.
shareholding in PSU would be offered to
Mutual Funds, Financial Institutions, General
Publuc & Employees
Govt. shareholding not to go below 51%

Fin Ministers Budget

Speech
Public Shareholding ensures higher

transparency & acountability. To promote this

objective, the General Insurance Cos owned
by the govt.will be listed in the stock
exchanges , Arun Jaitley said in his budget
speech
He has renamed the disinvestment Dept. as
DIPAM ( Dept. of Investment & Public Asset
Management)

..contd
Niti Aayog will identify the PSEs, advise the

govt. on mode of sale, percentage of shares to

be sold & the method of evaluations

Disinvestment in General Insurance

The Ins Laws Amendment Act 2015 enables th

Govt. to dilute equity stakes in PSU Ins. Cos. by

upto 51% to raise capital, keeping in mind the
need for expansion of the business.
Fin Ministry wants the Balance sheets of the cos.
cleaned up before any dilution is undertaken
This was led by the large provisioning
requirement of the 4 PSUs for certain liabilities
esp Motor TP & unexpired risks
Would be through initial public offering route or
through transfer of govt. stake

CONCLUSION
Today ins. cos. generate only investment

profit
Disinvestment is expected to bring in u/w

discipline in the gen ins sector

There are social, political & economic issues
which need to be sorted out by the Govt.

THANK YOU