DISINVESTMENT

DAY -
 What is disinvestment?

 Disinvestment is the action of an organization or government selling or liquidating an asset or

subsidiary. Absent the sale of an asset, disinvestment also refers to capital
expenditure reductions, which can facilitate the re-allocation of resources to more productive
areas within an organization or government-funded project.
 LIQUIDATING - it is the process of selling assets owned by a company so to get money to pay
off creditors or the shareholders when a company closes.
 CAPITAL EXPENDITURE – it refers to the process of spending money generated during a
financial year to buy new assets or to repair existing or damaged assets.
 ABOUT PUBLIC DISINVESTMENT:
• Disinvestment is a measure towards participative ownership of the public sector enterprises.
Till disinvestment process was set in motion the public sector enterprise were owned 100% by
the government. Now the general public is given a chance to own a share in the public
sector enterprises to promote the concept of joint ownership.
• Till the early 1990s the government policies were protectionist in nature and control oriented
rather than supporting free enterprise, which resulted in technological backwardness and
inefficiencies.
• However in the early 1990s there was a shift in the policy and the economy was opened up.
This change in the policy has resulted in the government’s decisions to sell shares of
government owned enterprises.
• In Public sector units in India, is process of public asset sales by President of India on behalf
of Government of India, directly (offer for sale to public) or indirectly (bidding process) in
capitalized market.
 THE NEW ECONOMIC POLICY ( JUNE 1991)
Under this policy many PSU’s were sold to private sector. Literally speaking, privatisation is the process
of involving the private sector-in the ownership of Public Sector Units (PSU’s).
The main reason for privatisation was that the PSU’s were running in losses. Production capacity
remained under-utilized. To increase competition and efficiency privatisation of PSUs was inevitable.
Step taken for Privatisation:
The following steps are taken for privatisation:
1. Sale of shares of PSUs:
Indian Govt. started selling shares of PSU’s to public and financial institution e.g. Govt. sold shares of
Maruti Udyog Ltd. Now the private sector will acquire ownership of these PSU’s. The share of private
sector has increased from 45% to 55%.
2. Disinvestment in PSU’s:
The Govt. has started the process of disinvestment in those PSU’s which had been running into loss. It
means that Govt. has been selling out these industries to private sector.
3. Minimisation of Public Sector:
Previously Public sector was given the importance with a view to help in industrialisation and removal
of poverty. But these PSU’s could not able to achieve this objective and policy of contraction of PSU’s
was followed under new economic reforms.
Number of industries reserved for public sector was reduces from 17 to 3.
(a) Transport and railway
(b) Mining of atomic minerals
(c) Atomic energy
 Types of disinvestment in our county:

Minority Disinvestment
A minority disinvestment is one such that, at the
end of it, the government retains a majority
stake in the company, typically greater than Minority
51%, thus ensuring management control. disinvestment
Majority Disinvestment
A majority disinvestment is one in which the
government, post disinvestment, retains a Majority
minority stake in the company i.e. it sells off a disinvestment
majority stake. It is also called Strategic
Disinvestment. Complete
Complete Privatisation privatization
Complete privatisation is a form of majority
disinvestment wherein 100% control of the
company is passed on to a buyer. Examples of
this include 18 hotel properties of ITDC and 3
hotel properties of HCI.
DISINVESTMENT TARGET AND ACHIEVMENT

SL.NO. FINANCIAL YEAR TARGET (IN RS. CRORE) ACHIEVEMENT (IN RS. CRORE)
1. 2011-12 40,000.00 13,894

2. 2012-13 30,000.00 23,957

3. 2013-14 40,000.00 15,819

4. 2014-15 43,425.00 24,349

5. 2015-16 41,000.00 (excluding strategic 23,997

disinvestment of Rs. 28,500 crore)

6. 2016-17 56,500 46,246.58

7. 2017-18 1,00,000 1,00,056.91

DISINVESTMENT TARGET AND ACHIEVMENT (GRAPHICAL REPRESENTATION):
Recent disinvestments:
a) National thermal power cooperation limited (NTPC)
following the target to raise Rs 30,000 crore, to be raised through
disinvestment, the government sold 9.5% shares of NTPC through
which the government raised Rs. 11,400 crores.
The government currently owns 58.93%.

b) COAL INDIA LIMITED:

Amount of shares disinvested: 3.19%
Remaining shares with GOI: 75.46%
Receipts (in crores) : 5218.30

c)HSCC (Hospital Services Consultancy

Corporation):
Amount of shares disinvested: 100%
Remaining shares with GOI: 0%
Receipts (in crores) : 285.00
Financial year Total receipt by stake sales (in crores)
2013-2014 15,819
2014-2015 24,348
2015-2016 23,996
2016-2017 46,247
2017-2018 1,00,056