What is the Divestment and Government plan?
- Divestment is a process of reduction of assets for financial, ethical, or political objectives.
- Divestment is just opposite of investment, where stake is being intentionally reduced with some specific purpose.
- The Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi on Wednesday approved selling of 10 per cent stake of Coal India which would raise Rs 23,600 crore.
- Similarly, Rs 19,000 will be collected through 5% sell in ONGC and Rs 3,000 crore will be collected through selling 11.3% stake of NHPC.
- Report say that several other companies, such as Bhel and Power Finance Corporation , are also on the disinvestment department's radar but nothing has been finalized yet.
- Speaking on the matter, Finance Minister arun Jaitley said, "The Department of Disinvestment (DoD) has already appointed advisors in some cases and the follow-up actions on those PSUs on some part of equity is to be divested is already progressing as scheduled".
- Earlier, in 2012 during UPA tenure, the cabinet had approved a 10.82 per cent stake sale in SAIL.
- As Gujarat Chief Minister Narendra Modi has got credit of turning around of several public sector undertakings, or PSUs.
- Modi changed the Gujarat State Fertilisers & Chemicals, which was making a loss in 2003 into a profitable organisation which currently is providing a return on equity of 15 per cent.
Why it is imminent?
- In the backdrop of burgeoning fiscal deficit, it is necessity to give spur to economic growth and tide over revenue shortfall.
- Money generated through Divestment process will play an important role n financing infrastructure development.
- According to ET report say that government can even raise Rs 1 lakh crore by divesting stake in the top 10 cash-rich PSUs.
- The top 10 PSUs in which the government can divest 10 per cent or more stake are: ONGC, Coal India, State Bank of India, NTPC, Indian Oil Corporation, NMDC, Power Grid Corporation, Bharat Heavy Electricals Ltd,GAIL (India) Ltd and Bank of Baroda.
UPA failed to achieve target
- In Budget , Modi government has estimated to collect Rs 43,425 crore from selling stake in PSUs.
- It was also planned to collect an amount of Rs 15,000 crore with the sale of residual stake in the erstwhile government companies.
- Successive Government has poor record on this front which can be understood that except for 1991-92, 1994-95 and 1998-99, the government has never met its annual disinvestment target.
- UPA Government faltered completely as it never achieved target. In 2013-14, against the target of Rs 40,000 crore, Government could mobilised Rs 15,820 crore only.
- Similarly in 2012-13, Rs 23,957 crore was raised against Rs 30,000 crore. In 2011-12, only Rs 13,894 crore could be managed of the Rs 40,000 crore target.