Union Government gives in-principle approval for strategic sale in some PSUs

The Union Cabinet has given its in-principle approval for strategic sale of over a dozen public sector undertakings (PSUs).
This decision was taken based on the recommendation of NITI (National Institution for Transforming India) Aayog’s proposal on disinvestment and strategic sale of sick PSUs.
Key Facts

• The strategic disinvestment of such public sector units with the transfer of management control to a private entity will be taken up subsequently on a case-by-case basis.
• It will be undertaken after consultations with their respective administrative ministries without any timeline.
• The Union Government had set a target to raise Rs. 20,500 crore in 2017-18 through strategic sales of PSUs and another Rs. 36,000 crore from sale of minority stakes in PSUs.
• There is no specific timeline set for disinvestment and strategic sale of sick PSUs. Each PSU will be considered on ‘its own merit’ with the timing of the sale to be decided accordingly.
• Union Government will follow settled valuation procedures in a transparent process for such transactions.

What is strategic disinvestment?

• In Strategic disinvestment the management control and a significant proportion of a PSU’s share goes to a private sector strategic partner.
• Thus, strategic disinvestment of a PSU is different from the ordinary disinvestment in which management of PSU is retained with Government.
• According to the Department of Disinvestment, in the strategic disinvestment of a PSU, the transaction has two elements: (i) Transfer of a block of shares to a Strategic Partner and (ii) Transfer of management control to the Strategic Partner.

Month: Current Affairs - October, 2016