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What is Disinvestment?
Quick Fact government also hands over management control to private parties, it is termed ‘privatisation’. Ever since India launched the New Economic Policy (NEP) in July 1991, disinvestment has been an important policy area. Also, in recent years the issue of disinvestment has come to the fore due to the large scale fiscal deficit that the government has been running up. While presenting this year’s Union Budget, Finance Minister P. Chidambaram proposed estimated divestment proceeds of 40,000 crore for 2013-14, even when the Economic Survey released a few days before the Budget, had suggested that the Government should try to raise at least 25,000 crore every year by divesting its stake in state-run companies to meet the burgeoning fiscal deficit. The Rangarajan Committee expressed the view that in the case of PSUs for which the first sale is yet to be made or where the track record is yet to be established, two methods are recommended: (a) the method of sale by fixing a predetermined share price, and (b) the method of sale through auction among a pre-determined clientele (by way of shortlisting through tenders) as two acceptable and transparent processes for divestiture. In addition, it also identified a third method of transfer of controlling interest in an enterprise to a specific firm or person. It noted that all these methods have their merits and demerits; provide better quality services; reduce political interference, and reduce wastage and optimise resources. In short, the champions of disinvestment believe that the basic difference lies in the management style of the public and private sectors. Once disinvestment happens, the problems could be tackled by the private sector.
28 September 2013


he sale of the government’s shareholding in Public

Sector Units (PSUs), to…...

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