DISINVESTMENT

Disinvestment is a process of selling government equities in public sector enterprises. Disinvestment in India is seen connected to three major inter- related areas, namely—

(i) A tool of public sector reforms40

(ii) A part of the economic reforms started in mid-1991. It has to be done as

a complementary part of the ‘de-reservation of industries’.41

(iii) Initially motivated by the need to raise resources for budgetary allocations.42

The approach towards public sector reforms in India has been much more cautious than that of the other developing countries. India did not follow the radical solution to it—under which outright privatisation of commercially viable PSUs is done and the unviable ones are completely closed.43 There was an emphasis on increasing functional autonomy of public sector organisations to improve their efficiency in the 1980s in India as part of the public sector reforms. Once the process of economic reforms started in the early 1990s, disinvestment became a part of the public sector reforms. The C. Rangarajan Commission on Disinvestment of the Public sector Enterprises (1991) went on to suggest the government on the issue in a highly commendable and systematic way, taking empirical notes from the experiences of disinvestment around the world. The government started the process of disinvestment in 1991 itself. In 1997 the goverment did set up a Disinvestment Commission to advice upon the various aspects of the disinvestment process. The financial year 1999–2000 saw a serious attempt by the government to make disinvestment a political process to expedite the process of disinvestment in the country—first a Disinvestment Department and later a full-fledged Ministry of Disinvestment was set up.44 The new government (UPA) dismantled the Ministry of Disinvestment and today only the Department of Disinvestment is taking care of the matter, working under the Ministry of Finance.‌

Types of Disinvestment

Since the process of disinvestment was started in India (1991), its consisted of two official types. A brief discussion on them is given below: