Post Independence, the Government of India took a step to fill the gap of the absence of major private players. 1950 – 1990 Many PSUs faced challenges right from adaptive innovations to capital infusions.
The situation from the 1990s – Present
•1991 – LPG Reforms and almost 30 PSUs divested.
•1999 – VSNL first company to be divested by a means of the public offer.
•2005 – National Infra fund set up for divestment proceeds deployment.
•2016 – Department of divestment renamed as DIPAM
•FY2021 – INR 2 Tn target for divestment that includes LIC.
The rationale behind divestment by the Government of India
•Reduce the financial burden on the books of government.
•Improve public finances
•Finance growth from the proceeds
•Increase ownership by introducing multiple key players.
•Government should not be looking for a business.
•Government should not be utilizing tax paying money on financing these PSUs by a way of Capital infusion
•Private Sector is efficient to run the business like aviation and telecom.
•Some services should always be backed by the government, a private monopoly in cases exploits common man
•Profit making PSUs shouldn’t be sold
•It is not always that private sector companies don’t default or close down
•Dividends to the government will be decreased.
Comments in media on divestments
•Special Purpose vehicle can be created to monetize assets of loss-making PSUs.
•Divestment in phases like Hindustan Zinc can be an option
•Ramakrishna Commission report to be closely watched.