Disinvestments Current Affairs

CCEA approves procedure and mechanism for Strategic Disinvestment

The Cabinet Committee on Economic Affairs (CCEA) chaired by the Prime Minister Narendra Modi has approved revision in the procedure and mechanism for strategic disinvestment.

In this regard, the proposal was forwarded by the Department of Investment and public Asset Management (DIPAM). The approval will help in speedy completion of strategic disinvestment transactions.

Revised mechanism for strategic disinvestment

Setting up an Alternative Mechanism (AM): It will decide on the matters relating to terms and conditions of the sale from the stage of inviting of Express of Interests (Eols) till inviting of financial bid. It will consist of the Finance Minister, Minister for Road Transport & Highways and Minister of Administrative Department.

Empowering the Core Group of Secretaries (CGD): It will enable CGD to take policy decisions with regard to procedural issues and consider deviations as necessary from time to time for effective implementation of decisions of CCEA. 

Strategic Disinvestment

In Strategic disinvestment, significant proportion of a Public Sector Unit’s (PSU) share and the management control goes to a private sector which is considered as strategic partner. It is different from the ordinary disinvestment in which management of PSU is retained with Government.

Department of Investment and public Asset Management (DIPAM)

DIPAM is the nodal agency of Union Finance Ministry mandated to advise the Union Government in the matters of financial restructuring of PSUs and also for attracting investment through capital markets. It will also deal with all matters relating to sale of Union Government’s equity in PSUs through private placement or offer for sale or any other mode in the erstwhile Central PSUs.

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Union Government gives in-principle approval for strategic sale in some PSUs

The Union Cabinet has given its in-principle approval for strategic sale of over a dozen public sector undertakings (PSUs).

This decision was taken based on the recommendation of NITI (National Institution for Transforming India) Aayog’s proposal on disinvestment and strategic sale of sick PSUs.

Key Facts

  • The strategic disinvestment of such public sector units with the transfer of management control to a private entity will be taken up subsequently on a case-by-case basis.
  • It will be undertaken after consultations with their respective administrative ministries without any timeline.
  • The Union Government had set a target to raise Rs. 20,500 crore in 2017-18 through strategic sales of PSUs and another Rs. 36,000 crore from sale of minority stakes in PSUs.
  • There is no specific timeline set for disinvestment and strategic sale of sick PSUs. Each PSU will be considered on ‘its own merit’ with the timing of the sale to be decided accordingly.
  • Union Government will follow settled valuation procedures in a transparent process for such transactions.

What is strategic disinvestment?

  • In Strategic disinvestment the management control and a significant proportion of a PSU’s share goes to a private sector strategic partner.
  • Thus, strategic disinvestment of a PSU is different from the ordinary disinvestment in which management of PSU is retained with Government.
  • According to the Department of Disinvestment, in the strategic disinvestment of a PSU, the transaction has two elements: (i) Transfer of a block of shares to a Strategic Partner and (ii) Transfer of management control to the Strategic Partner.

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