What is Strategic Disinvestment?

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What is Strategic Disinvestment? Blog Image

Overview:

The Government recently invited Request for Proposal (RFP) to engage an asset valuer for Strategic Disinvestment of IDBI Bank.

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 enterprisethat 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