The new economic policy initiated in July 1991 clearly indicated that PSUs, which were established as pillars of growth, had shown a very negative rate of return on capital employed as per changing economic scenario. New Economic reform provided for disinvestment, the Government to raise funds for meeting general/specific needs from the non-performing PSUs. In this direction, the Government adopted the ‘Disinvestment Policy’.
Recent Developments Disinvestment Targets
Role of Niti Aayog: NITI Aayog has been made the nodal agency to identify the PSUs for sale/closure. It has identified 44 companies for strategic disinvestment and 26 loss-making PSUs for closure. |
Disinvestment is the action of an organization or government selling or liquidating an asset or subsidiary. It is a process in which the public undertaking reduces its portion in equity by disposing its shareholding. The disinvestment reduces government participation in the company.
Objectives of Disinvestment
Main objectives of disinvestment were outlined as:
Committees Related to Disinvestment
The Rangarajan Committee on Disinvestment (1993)
The Rangarajan Committee of 1993 was constituted by the government for making recommendations in context with the disinvestment. The committee said that:
Disinvestment: Arguments Favour
Against
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Disinvestment Commission (1996)
G.V. Ramakrishna (Head of committee) identified 58 CPUs for purpose of disinvestment and suggested that the long term disinvest policy should stress that on minimizing budgetary support to unprofitable PSUs.