{"id":38764,"date":"2023-12-26T04:56:08","date_gmt":"2023-12-25T23:26:08","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=38764"},"modified":"2025-04-23T18:11:27","modified_gmt":"2025-04-23T12:41:27","slug":"disinvestment","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/disinvestment\/","title":{"rendered":"Disinvestment in India &#8211; Centre likely to miss disinvestment target yet again in FY 2024"},"content":{"rendered":"<h2>What\u2019s in today\u2019s article?<\/h2>\n<ul>\n<li>Why in news?<\/li>\n<li>What is Disinvestment?<\/li>\n<li>Evolution of Disinvestment in India<\/li>\n<li>Benefits of Disinvestment<\/li>\n<li>Criticism of disinvestment<\/li>\n<li>News Summary: Disinvestment in India &#8211; Centre likely to miss disinvestment target yet again in FY 2024<\/li>\n<li>Key highlights: Centre likely to miss disinvestment target yet again in FY 2024<\/li>\n<\/ul>\n<h2>Why in news?<\/h2>\n<ul>\n<li>As the upcoming general elections approach, the government is slowing down its push for privatization.<\/li>\n<li>They are cautious about criticism for selling valuable assets and are choosing to sell only a portion of their ownership on stock exchanges instead of fully privatizing.<\/li>\n<li>As a result, the disinvestment target for current fiscal year is again likely to be missed.<\/li>\n<\/ul>\n<h2>What is Disinvestment?<\/h2>\n<ul>\n<li>About\n<ul>\n<li>Disinvestment means <u>sale or liquidation of assets by the government<\/u>, usually Central and state public sector enterprises, projects, or other fixed assets.<\/li>\n<li>In some cases, disinvestment may be done to privatise assets. However, not all disinvestment is privatisation.\n<ul>\n<li>In complete privatisation, 100% control of the company is passed on to the buyer.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li>Objectives\n<ul>\n<li>Reducing the fiscal burden on the exchequer<\/li>\n<li>Improving public finances<\/li>\n<li>Encouraging private ownership<\/li>\n<li>Funding growth and development programmes<\/li>\n<li>Maintaining and promoting competition in the market<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2>Evolution of Disinvestment in India<\/h2>\n<ul>\n<li>Disinvestment in India began in 1991-92 when 31 selected PSUs were disinvested for Rs. 3,038 crores.\n<ul>\n<li>The term \u2018disinvestment\u2019 was used first time in Interim Budget 1991.<\/li>\n<\/ul>\n<\/li>\n<li>Later, Rangarajan committee, in 1993, emphasised the need for substantial disinvestment.<\/li>\n<li>The policy on disinvestment gathered steam, when a new Department of Disinvestment was created in 1999, which became a full Ministry of Disinvestment in 2001.<\/li>\n<li>But in 2004, the ministry was shut down and was merged in the Finance ministry as an independent department.<\/li>\n<li>Later, the Department of Disinvestments was renamed as Department of Investments and Public Asset Management (DIPAM) in 2016.\n<ul>\n<li>Now, DIPAM acts as a nodal department for disinvestment.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2>Benefits of Disinvestment<\/h2>\n<ul>\n<li>Helps government with the money\n<ul>\n<li>Govt also uses disinvestment proceeds to finance the fiscal deficit, to invest in the economy and development or social sector programmes.<\/li>\n<\/ul>\n<\/li>\n<li>Beneficial for long term growth of the country\n<ul>\n<li>As it allows the government and even the company to reduce debt.<\/li>\n<\/ul>\n<\/li>\n<li>Encourages private ownership of assets and trading in the open market.\n<ul>\n<li>Private ownership of assets often brings efficiency and increases the profitability.\n<ul>\n<li>E.g., Hindustan Zinc was acquired by Vedanta in 2022. Since then, it has seen 100 fold increase in profits on the back of six fold expansion in capacities.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li>Often releases large amount of public resources\n<ul>\n<li>Disinvestment releases large number of public resources (tangible &amp; intangible both) such as manpower, assets etc.<\/li>\n<li>These resources can be re-deployed in high priority social sector.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2>Criticism of disinvestment<\/h2>\n<ul>\n<li>Loss of regular payments to the government\n<ul>\n<li>Profit making PSUs pay dividend to the govt at regular interval.<\/li>\n<\/ul>\n<\/li>\n<li>Can create private monopoly\n<ul>\n<li>Disinvestment might create private monopoly in place of public monopoly.\n<ul>\n<li>E.g., Disinvestment of VSNL to TATA, IPCL to Reliance<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li>Vague classification of strategic and non-strategic sectors\n<ul>\n<li>Many proponents claim that govt should retain its presence in strategic sector while going for disinvestment in non-strategic sectors.<\/li>\n<li>However, the classification of strategic and non-strategic sector is not done properly.<\/li>\n<li>E.g., Strategic disinvestment in Oil sector might threaten the energy security of India.<\/li>\n<\/ul>\n<\/li>\n<li>Faulty model\n<ul>\n<li>Using disinvestment funds to bridge the fiscal deficit has been termed as a faulty model by many analysts.<\/li>\n<li>It is equivalent to selling family silver to meet short term goals.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2>News Summary: Disinvestment in India &#8211; Centre likely to miss disinvestment target yet again in FY 2024<\/h2>\n<ul>\n<li>Plans to privatize major entities like Bharat Petroleum Corporation Ltd (BPCL), Shipping Corporation of India (SCI), and CONCOR have been put on hold.<\/li>\n<li>Experts believe that substantial privatization may only resume after the general elections in April or May.<\/li>\n<\/ul>\n<h2>Key highlights: Centre likely to miss disinvestment target yet again in FY 2024<\/h2>\n<ul>\n<li>Target and achievements so far in the current fiscal\n<ul>\n<li>In the current fiscal, out of the budgeted amount of Rs 51,000 crore, about 20 per cent or Rs 10,049 crore has been collected through minority stake sales.\n<ul>\n<li>According to the recently release Economic Survey report, about \u20b94.20 lakh crore has been realised as disinvestment proceeds in the past ten years.<\/li>\n<li>So far, different central governments over the last three decades have been able to meet annual disinvestment targets only six times.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li>Multiple challenges in 2023\n<ul>\n<li>After the successful privatisation of the then loss-making Air India to Tata group and NINL to TSLP in 2022, the government was hopeful of going ahead with more CPSE divestments and reaching a quick conclusion.<\/li>\n<li>However, 2023 has no good news on the strategic sale front.<\/li>\n<li>The difficulties involved in the <u>strategic sale process, with the involvement of multiple stakeholders, make the task at hand a long drawn affair<\/u>.<\/li>\n<\/ul>\n<\/li>\n<li>Principle followed by the govt\n<ul>\n<li>A fundamental principle behind the government&#8217;s policy in the post-2014 period has been the <u>engagement with the private sector as a partner in the development process<\/u>.<\/li>\n<li>The government&#8217;s disinvestment policy has been revived in the last eight years with stake sales and the successful listing of Public Sector Enterprises on the stock market.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<hr \/>\n<h3>Q1)\u00a0What is Department of Investments and Public Asset Management (DIPAM)?<\/h3>\n<p>The Department of Investment and Public Asset Management (DIPAM) is a department under the Ministry of Finance that manages the government&#8217;s holdings in state-owned enterprises.\u00a0<\/p>\n<h3>Q2)\u00a0What is Public Sector Undertaking (PSU)?\u00a0<\/h3>\n<p>Public Sector Undertakings (PSU) or Public Sector Enterprises (PSE) in India are government-owned enterprises in which 51 percent or more share capital is held by the Government of India or state governments or Joint venture between multiple Public Sector Enterprises.<\/p>\n<hr \/>\n<p><strong>Source: <\/strong><a href=\"https:\/\/economictimes.indiatimes.com\/news\/economy\/finance\/disinvestment-fetches-over-rs-4-20-lakh-cr-in-10-years-but-target-to-be-missed-again-in-fy24\/articleshow\/106262884.cms\" target=\"_blank\" rel=\"nofollow noopener\"><u>Disinvestment fetches over Rs 4.20 lakh cr in 10 years but target to be missed again in FY24<\/u><\/a><u> | <\/u><a href=\"https:\/\/dipam.gov.in\/past-disinvestment-policy\" target=\"_blank\" rel=\"nofollow noopener\"><u>DIPAM<\/u><\/a><u> | <\/u><a href=\"https:\/\/www.financialexpress.com\/what-is\/disinvestment-meaning\/1762574\/\" target=\"_blank\" rel=\"nofollow noopener\"><u>Financial Express<\/u><\/a><u> | <\/u><a href=\"https:\/\/economictimes.indiatimes.com\/news\/economy\/finance\/disinvestment-fetches-over-rs-4-20-lakh-cr-in-10-years-but-target-to-be-missed-again-in-fy24\/articleshow\/106262884.cms\" target=\"_blank\" rel=\"nofollow noopener\"><u>Economic Times<\/u><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Disinvestment is when a government or organization sells or liquidates an asset or subsidiary.<\/p>\n","protected":false},"author":5,"featured_media":38765,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[],"class_list":{"0":"post-38764","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/38764","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=38764"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/38764\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/38765"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=38764"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=38764"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=38764"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}