What are DIPAM Guidelines on Strategic Disinvestment?

April 23, 2022

The public sector enterprises (PSEs) have been barred by the Finance Minister from participating in the strategic disinvestment of other government-owned companies unless given specific approval by the Central Government.

Overview:

Public Sector Enterprises/ State Governments/ Cooperative Societies that are controlled by the Governments have not been given permission to participate in the strategic disinvestment of other PSUs as bidders unless given approval by the Central Government.

Reasons for the announcement

The announcement has been made after examining the Public Sector Enterprises (PSEs) participation as a bidder in the strategic disinvestment of PSE in accordance with the new PSE policy. Department of Investment and Public Asset Management (DIPAM) also highlighted that the policy established four broad Strategic Sectors that are based on the criteria of energy security, national security, provision of financial services, critical infrastructure, and availability of important minerals.

Points highlighted by DIPAM

DIPAM has highlighted that PSEs suffer from a lack of innovation, fresh capital infusion, the ability to diversify production and services, and modern technology. Also, due to multiple accountability systems, these enterprises lack adaptability and are also commercially risk-averse in a dynamic business environment. Hence, the productive assets remain locked in such PSEs that result in the sub-optimal realization of the country’s valuable economic opportunities.

DIPAM’s view about the PSE Policy

DIPAM has stated that the PSE policy will be minimizing the government’s presence in the PSEs across all economic sectors so that newer investment opportunities can be made available for the private sector, so that infusion of private capital, innovation, technology, and best management practices can happen which in turn will help in the growth of PSEs post-privatization and will also be generating higher economic activities that will help in creating new job opportunities and the growth of ancillary industries. Thereby, if the transfer occurs between Government Organisations the purpose of disinvestment will be defeated.

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