What is Strategic Disinvestment?

About Strategic Disinvestment

• Strategic disinvestment would imply the sale of a substantial portion of the Government shareholding of a central public sector enterprise (CPSE) of upto 50%, or such higher percentage as the competent authority may determine, along with transfer of management control.
• It involves the transfer of ownership and control of a public sector entity to some other entity, either private or public.
• What is the difference between strategic disinvestment/sale and disinvestment?
  • Selling minority shares of Public Enterprises to another entity, be it public or private, is disinvestment. In this, the government retains ownership of the enterprise.
  • On the other hand, when the government sells majority shares in an enterprise, that is strategic disinvestment/sale. Here, the government gives up the ownership of the entity as well.
• Objectives:
  • Reduce Government Ownership;
  • Raise Capital;
  • Improve Efficiency;
  • Promote Competition;
  • Attract Private Investment;
  • Focus on Core Functions;
  • Reduce Fiscal Burden;

Q1) What is a public sector enterprise?

Public enterprise, a business organization wholly or partly owned by the state and controlled through a public authority. Some public enterprises are placed under public ownership because, for social reasons, it is thought the service or product should be provided by a state monopoly. Utilities (gas, electricity, etc.), broadcasting, telecommunications, and certain forms of transport are examples of this kind of public enterprise.

Source: DIPAM invites RFP to appoint an asset valuer for IDBI Bank’s strategic disinvestment