Context:

In the Union Budget for 2023-24, the government has set a disinvestment target of ₹51,000 crore, down nearly 21% from the budget estimate for the current year. It is also the lowest target in seven years.

About Disinvestment: 

• It means sale or liquidation of assets by the government.
• Not all disinvestment is privatization. In complete privatization,100% control of the company is passed on to the buyer.

Evolution of Disinvestment in India: 

• Disinvestment in India began in 1991-92.
• The term was used for the first time in the Interim Budget 1991. 
• Rangarajan committee in 1993, emphasized the need for substantial disinvestment. 
• The policy on disinvestment gathered steam, when a new Department of Disinvestment was created in 1999, which became a full Ministry in 2001.
• Later, the Department of Disinvestment was renamed as Department of Investments and Public Asset Management (DIPAM) in 2016. Now, DIPAM acts as a nodal department for disinvestment.
• As part of the May 2020 Atma-Nirbhar Bharat package to stabilize the lockdown-hit economy, the Government announced a Public Sector Enterprise Policy to encourage private sector participation and reduce Government involvement in business. 
• The government also launched the National Monetisation Pipeline (NMP) to generate new revenue streams by unlocking the value of previously unutilised and underutilized public assets.

Challenges and concerns related to Disinvestment: 

• Loss of regular income:  It would result in the loss of regular income to the Government. 
• Inefficiency: The valuation of shares has been affected by the Government’s decision not  to reduce government holdings below 51%. With the continuing majority ownership of the Government, the public enterprises would continue to operate with the earlier culture of inefficiency.
• Bureaucratic Control: The process of disinvestment is suffering from bureaucratic control.
• National Security: Strategic Disinvestment of Oil is seen by some experts as a threat to National Security. 
• Loss-Making Ventures:  Loss-making units don’t attract investment. It depends upon the perception of investors about the PSU being offered. 
• Monopolisation: Complete Privatization may result in public monopolies becoming private monopolies, which only seeks to increase costs of various services and earn higher profits.

NITI Aayog’s recommendations on Disinvestment:

• First, disinvestment proposals should go directly to the Cabinet Committee on Economic Affairs (CCEA).
• Second, the Government should consider the appointment of Advisors and Asset valuers to speed up the process of disinvestment. 
• Third, an independent professional agency should be set-up to speed-up the Asset Monetisation Programme.

Way Forward:

• First, the Government should increase the operational autonomy of PSEs. 
• Second, the government must also try to provide the bidders with a fair valuation of the Government entities. It will boost their confidence in the disinvestment process.

News Source: The Hindu