What is Disinvestment?

• Divestment or disinvestment means selling a stake in a company, subsidiary or other investments. 
• Governments resort to divestment generally to reduce financial burden due to inefficient public sector undertakings (PSU’s) and to improve public finances. It introduces competition and market discipline and helps to depoliticise non-essential services.

What is Strategic disinvestment?  

• Strategic disinvestment implies the sale of a substantial portion of the Government shareholding of a central public sector enterprises (CPSE) of up to 50%, or such higher percentage as the competent authority may determine, along with transfer of management control.

Nodal Authority

• The Department of Investment and Public Asset Management (DIPAM) under the Ministry of Finance is the nodal department for the strategic disinvestment.
• DIPAM and NITI Aayog jointly identify PSU’s for strategic disinvestment.

New Public Sector Enterprise Policy

• Recently, as a part of the Aatmanirbhar Bharat package, the government announced that it will open all sectors to the private sector including strategic sectors, and a new coherent policy in this regard will be unveiled. 
• The proposed policy will notify the list of strategic sectors requiring the presence of at least one state-owned company along with the presence of the private sector. In all other sectors, the government plans to privatise public sector enterprises depending upon the feasibility. 
• Even in the strategic sectors, no more than four PSUs will be allowed, with the rest being privatised, merged or brought under holding companies.

Why in News?

• Finance Minister Nirmala Sitharaman recently said that the government is working on completing the stake sale process of about 23 public sector companies whose divestment has already been cleared by the Cabinet.
• She said this would lead to consolidation of PSU’s as well as scaling up of their operations.
• For the 2020-21 fiscal, the government has set a disinvestment target of ₹2.10 lakh crore. Of this, ₹1.20 lakh crore will come from disinvestment of public sector undertakings and another ₹90,000 crore from stake sale in financial institutions.

Reference:

1. https://www.thehindu.com/business/Industry/govt-to-go-ahead-with-divestment-of-23-psus-cleared-by-cabinet-nirmala-sitharaman/article32206108.ece