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ITS HIGH TIME TO INVEST SOME THOUGHT IN DISINVESTMENT
Disinvestment is one of the most discussed topics in today’s economy. The Government is aiming to raise the disinvestment proceeds to 1 lakh Crore by the end of this Financial Year. The process for disinvestment of 24 Central Public Sector Enterprises has started already. While there might be voices for or against it, but every rational business minded individual would agree that disinvestment is the need of the hour.
What exactly is disinvestment?
To put it in the layman’s language selling of shares of Public Sector Units is disinvestment. Disinvestment of PSUs is generally undertaken when it becomes burdensome and problematic for the government to run it smoothly. The Government through strategic disinvestment can then raise revenue as well as breathe life into the PSU concerned. Disinvestment maybe through various methods like Initial Public Offer, Further Public Offer, Sale Offer, Strategic sale, Institutional Placement programs, etc.
Why do we need disinvestment?
The current competitive environment is compelling most PSUs to run into losses. However there is more to the story than just revival of PSUs. The financing of increasing fiscal deficit is possible through disinvestment. As the earnings from GST fall disinvestment can be a major revenue earner for the Government. Besides, strategic disinvestment also encourages improving large-scale infrastructure and induces non-essential services to run outside the influence of politics.The Procedure for disinvestment of PSU
According to the Department of Investment and Public Asset Management the procedure for disinvestment includes the following steps:- Gaining consent of the Administrative Ministry of the CPSE.
- Approval of Disinvestment proposal
- Formation of Inter-Ministerial Group to supervise the entire process.
- Appointment of Legal Advisors and Merchant Bankers to take care of the transactions
- The advisors mentioned above then present the state of affairs to an High Level Committee.
- The committee then recommends the floor price and price band to “Alternative Mechanisms”
- Finally the “Alternative Mechanism” approves the price band.
