New highlights added January 6, 2023 at 10:29 AM
- The Vajpayee government started privatising entire firms despite severe opposition. (View Highlight)
- minority disinvestment. Here the government retains a majority stake (typically greater than 51%) while selling off a small piece of the public sector undertaking to other investors. These are typically low-risk endeavours. The government can pocket a little bit of money and they don’t get a lot of backlash, since the government retains management contro (View Highlight)
- But there are other kinds of disinvestments. — a majority disinvestment for instance. This happens when the government sells a majority stake to investors while ceding management control. When the Vajpayee government sold Modern Foods to HUL, they first sold 74% of the company to a private enterprise. That’s a majority disinvestment. And then there’s the most extreme version — complete privatisation when the government sells the whole company off to a private buyer. (View Highlight)
- This is rare. Very rare. One example includes the sale of Air India to Tata. Anyway, between 1999 and 2004, the government raised ₹24,260 crores by privatising several government-owned firms. The pace slowed down once again between 2004 and 2009 and the government only raised a measly ₹8000 odd crores. However, the next few years would wholly cement the Indian government’s position on disinvestment as the government sold shares to the tune of over ₹1 lakh crores. And the next 5 years, the BJP government did one better as they raised close to ₹2.8 lakh crores. (View Highlight)
- Now bear in mind, the government wasn’t always selling shares to private investors. Sometimes, they’d simply sell their stake to another PSU. For instance, the sale of HPCL to ONGC. So once again, not all disinvestments are equal and it doesn’t always drive home the point that Prime Minister Narendra Modi made in 2014 — “The government has no business to do business.” (View Highlight)