Ministerial group to oversee disinvestment: 

Ministerial group to oversee disinvestment: 

Context:

The Union Cabinet has mandated a panel led by finance minister Arun Jaitley to oversee, accelerate strategic disinvestments in CPSEs

Introduction

• The Cabinet on Wednesday empowered a ministerial group led by Finance Minister Arun Jaitley to decide on details of strategic disinvestment of public sector firms.
•  The Cabinet Committee on Economic Affairs (CCEA) has approved the proposal of the Department of Investment and Public Asset Management (DIPAM) for setting up an Alternative Mechanism (AM) consisting of the Finance Minister, Minister for Road Transport and Highways and Minister of Administrative Department.

Purpose:

• The panel will help the government raise more revenue from asset sales.
• It will decide on the matters relating to terms and conditions of the sale from the stage of investing of Express of Interest (Eols) till inviting the financial bid.
• The panel will decide on matters relating to terms and conditions of the strategic sale from calling for expressions of interest from potential buyers to inviting financial bids.
• The new mechanism will empower the core Group of Secretaries (CGD) to take policy decisions regarding procedural issues and to decide on deviations as and when necessary for the effective implementation of the decision taken by the CCEA.
• This will speed up the process of strategic disinvestment.
• The government has so far shortlisted BEML Ltd, Scooters India Ltd and Pawan Hans Ltd and three units of the Steel Authority of India Ltd for strategic disinvestment this year.
• The government has set an ambitious target of raising Rs72,500 crore from disinvestment in 2017-18, including Rs15,000 crore from strategic asset sales.

Key points:

•  Earlier this year, the government asked Niti Aayog to identify CPSEs for strategic disinvestment and advise it on the mode of sale, percentage of stake to be sold and the  method for valuation.
•  The CGD has been set up to consider the recommendations of the Niti Aayog to facilitate a decision by the CCEA on strategic disinvestment and to supervise the implementation process.
• The government has set up an alternative mechanism with the same composition to decide on minority stake sales in CPSEs.

Meaning of strategic disinvestment:

• Strategic disinvestment implies the sale of a substantial portion of government stake in a CPSE with transfer of management control.
• Strategic disinvestments have in the past been controversial and often become entangled in legal tussles.

Conclusion:

Government should opt for competitive bidding in the most transparent manner so that allegations of favouritism could be avoided.