Disinvestment Policy of India & Its Impact
Karishma Vora- PG12072
Purva Kashikar- PG12074
Rahul Chawla- PG12076
Priyanka Mahapadi- PG12078
Priyanka Gund- PG12080
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Disinvestment * Meaning * 3 Ps of disinvestment
| PSU * Meaning
Reasons for Disinvestment * Inefficiencies * Negative Rate of Return
| Objectives of Disinvestment * To reduce the financial burden on government * To improve public finances * To introduce competition and market discipline * To find growth
| Importance of Disinvestment * Utilisation of funds for: * Financing the increasing fiscal deficit * Financing large-scale infrastructure development * For investing in the economy to encourage spending
| Approaches of Disinvestment * Majority * Minority * Complete Privatization
| Past Disinvestment Policy
Current Disinvestment Policy * Salient features of the Policy * Government approved action plan for disinvestment in profit making government companies:
| Process of Disinvestment * Organizational structure * Areas under each joint secretary
| Disinvestment Procedure
Broad investment objectives * Salient Features * Fund managers * Corpus of NIF
Benefits of Disinvestment * For the government * For Market and Economy * For Tax Payers * For the Employees * For the PSU’s
| Disadvantages of Disinvestment * Concentration of Wealth * Loss of Employment * Lower Value of Realisation
| Problems in Disinvestment * Social * Political * Economic
| Recent Disinvestment Cases * Hindustan Copper Limited (HCL) * National Mineral Development Corporation (NMDC)
What is Disinvestment?
At the very basic level, disinvestment can be explained as follows:
* “Investment refers to the conversion of money or cash into securities, debentures, bonds or any other claims on money. * As follows, disinvestment involves the conversion of money claims or securities into money or cash.” * Disinvestment can also be defined as the action of an organisation (or government) selling or liquidating an asset or subsidiary. * It is also referred to as ‘divestment’ or ‘divestiture.’ * In most contexts, disinvestment typically refers to sale from the government, partly or fully, of a government-owned enterprise. * A company or a government organisation will typically disinvest an asset either as a strategic move for the company, or for raising resources to meet general/specific needs.
Thus disinvestment can be stated as:
* The process of reducing the stake of Government in PSUs /PSEs through sale of equity. * Disinvestment may be aimed at dilution or transfer of government ownership. * Thus Disinvestment can lead to partial or complete disinvestment. * It may be inferred that Disinvestment is a Process whereas Privatizing is one of its aim.
The Indian approach towards disinvestment seems to have gone totally wrong ever since the reforms process was initiated in the early 90's. The country now has lost the opportunity and its way as the pace of the entire process is very slow and lethargic in nature. While all the politicians claim to share a common platform on this issue but find the escape route by stating – We agree in principle but differ in details. The whole process of disinvestment is not encouraging. On the other hand the countries like Taiwan, Hungary, Thailand, Philippines, Korea, Turkey, Poland, Eastern Europe, West Asia and even China have marched ahead with the disinvestment program with a professional approach.
Needless to say the 3 P's of disinvestment – Promise, policy and performance is not much appreciable.
The paper focuses on the Objectives of disinvestment, Process of disinvestment, timing of...
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