The Ministry of Finance, under the Department of Investment and Public Asset Management (DIPAM), has taken the reins for strategic stake sales in Public Sector Undertakings (PSUs). Previously, these sales were identified by NITI Aayog, but moving forward it will be a collaborative effort between DIPAM and NITI Aayog. This change is designed to streamline and expedite the process, while minimizing the often obstructive involvement of administrative ministries.
Role Change for DIPAM and NITI Aayog
Until now, PSUs marked for strategic sales were earmarked by NITI Aayog. The reshuffle means that henceforth, DIPAM and NITI Aayog will work in unison to identify these PSUs. Additionally, the inter-ministerial group on disinvestment will now be co-chaired by the Secretary of DIPAM along with the Secretary of the administrative ministries involved. The main aim of these modifications is to hasten and simplify the process, reducing potential slowdowns caused by the administrative ministries’ interventions.
Department of Investment and Public Asset Management (DIPAM)
Originally called the Department of Disinvestment and functioning under the Ministry of Finance, it was renamed as Department of Investment and Public Asset Management (DIPAM) effective from 14th April, 2016. DIPAM’s remit includes everything related to the management of the Central Government’s equity investments, including disinvestment of equity in Central Public Sector Undertakings. It also handles the sale of Central Government equity via offer for sale, private placement, or other methods in the earlier Central Public Sector Undertakings.
Strategic Disinvestment Explained
Disinvestment refers to the reduction of the Government’s stake in a public enterprise. Strategic disinvestment refers to the transfer of ownership and control of a public sector entity to another entity, often from the private sector. So, unlike regular disinvestment, strategic sale implies a degree of privatization.
According to government policy, strategic disinvestment refers to the sale of a significant portion of the Government’s shareholding in a central public sector enterprise, up to 50% or even more if deemed fit by competent authority. Such a disinvestment also includes transfer of management control.
Strategic disinvestment follows the principle that the government should gradually exit businesses, especially those operating in sectors that have mature competitive markets. This is done in the belief that strategic investors could better realize the economic potential of these entities due to factors like capital infusion, technology upgrading, efficient management practices among others.
| Fact | Detail |
|---|---|
| Date of DIPAM Establishment | 14 April 2016 |
| Scope of Strategic Disinvestment | Up to 50% or higher |
| Rationale for Strategic Disinvestment | Exit from mature competitive markets |
About NITI Aayog
The National Institution for Transforming India, also known as NITI Aayog, was established via a resolution of the Union Cabinet on 1st January 2015. It replaced the Planning Commission which had been put in place in 1950. NITI Aayog functions as the Government of India’s premier policy-making body, delivering both directional and policy inputs. Along with the creation of strategic and long-term policies and programs for the Government of India, NITI Aayog also supplies relevant technical advice to the Centre and States. The governing council of NITI, chaired by the Prime Minister, includes the Chief Ministers of all States and Lt. Governors of Union Territories.