PSUs Current Affairs

Government shifts disinvestment advising role to Department of Economic Affairs

The Union Government has transferred the advising role of Department of Investment and Public Asset Management (DIPAM) on utilisation of the proceeds from disinvestment to the Department of Economic Affairs (DEA).

This announcement comes after the Union Cabinet approved an alternative mechanism to decide the modalities to do with stake sales in PSUs, so as to speed up the process and to streamline the disinvestment process.

Key Facts
  • The DEA in the Union Finance Ministry will now be in charge of financial policy in regard to the utilisation of proceeds of disinvestment channelised into the National Investment Fund (NIF).
  • The National Investment Fund was created in 2005 in which the proceeds from the disinvestment of Central Public Sector Enterprises (CPSEs) were to be channelised.
  • During his Budget speech 2016-17, Union Finance Minister Arun Jaitley had announced renaming the previously known Department of Investment as DIPAM.

Earlier the Cabinet Committee on Economic Affairs (CCEA) had given its approval to Alternative Mechanism to decide the modalities to do with stake sales in PSUs. Under this mechanism, the quantum of disinvestment in a particular Central Public Sector Undertaking (CPSE) will be decided on a case-by-case basis subject to Government retaining 51% equity and management control.

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CCEA approves listing of five general insurance PSUs at the stock exchanges

The Cabinet Committee on Economic Affairs (CCEA) has given its ‘in principle’ approval for listing the five Public Sector General Insurance Companies (2016-17) owned General Insurance Companies in the stock exchanges.

They are New India Assurance Company Ltd, United India Insurance Company Ltd, Oriental Insurance Company Ltd, National Insurance Company Ltd and General Insurance Corporation of India.

The shareholding of these PSGICs will be divested from 100% to 75% in one or more tranches over a period of time as per Securities and Exchange Board of India (SEBI) and Development Authority of India (IRDAI) rules and regulations.

Significance of listing of PSGICs
  • Bring transparency and equity in the companies functioning as listing on the stock exchange necessitates compliance requirements of SEBI.
  • Improve corporate governance and risk management practices leading to improved efficiency. It will lead to greater focus on growth and earnings.
  • Open the way for the companies to raise resources from the capital market to meet their fund requirements to expand their businesses, instead of being dependent on the Government for capital infusion.
  • Divestment in these companies will help government in raising resources and portion of the funds can be used by the company for expansion.
Background

The Union Finance Minister in his 2016-17 Budget speech had announced that public shareholding in Government-owned companies is a means of ensuring higher levels of transparency and accountability. In order to promote this objective, the general insurance companies owned by the Government will be listed on the stock exchanges.

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