Cabinet approves new strategic disinvestment process |ForumIAS

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News:Union Cabinet has approved a new process of strategic disinvestment with a view to expediting privatization of select PSUs.

Facts:

What are the new changes?

Under the new policy, the Department of Investment and Public Asset Management (DIPAM) under the Ministry of Finance has been made the nodal department for the strategic disinvestment sale.
Currently, PSUs for strategic sale are identified by NITI Aayog.But the new policy has now allowed DIPAM and NITI Aayog to jointly identify PSUs for strategic disinvestment.
Further, the DIPAM secretary would now co-chair the inter-ministerial group on disinvestment along with the secretary of administrative ministries concerned.

Additional information:

What is disinvestment?

Disinvestment is defined as the action of an organisation or government selling or liquidating an asset or subsidiary.It is also referred to as divestment.
In the case of Public Sector Undertakings(PSU), disinvestment means Government selling/ diluting its stake (share) in PSUs in which it has a majority holding.
Disinvestment is carried out as a budgetary exercise under which the government announces yearly targets for disinvestment for selected PSUs.
Government has set the disinvestment target of 1.05 lakh crore for the current financial year 2019-20.

Significance of disinvestment:

It improves the structure of incentives and accountability of PSUs in India.
It can help in the revival of loss-making public sector enterprises(PSU).
It can help in financing the increasing fiscal deficit.
It can also finance the large-scale infrastructure development, defense, education and healthcare projects.

Concerns on disinvestment:

The process of disinvestment is not favoured socially as it is against the interest of socially disadvantageous people.
After disinvestment, the employees of Public Sector Units(PSUs) will lose their jobs.
Government’s dividend income will also decline as it will have less shares in the PSUs.