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Indian Economy

Notes 4. In the Budget speech of 2003-04, the Government declared details regarding the establishing
of Disinvestment Fund and Asset Management Company to hold, manage and dispose the
residual holdings of Government.
5. In 2004, with the change in the Government, there was a change in the outlook of
Disinvestment Policy.

Did u know? In May 2004, the Government adopted National Common Minimum
Programme, which outlined the policy of the Government with respect to the Public
Sector.

It is important to note that the UPA Government pledged to transfer full managerial control and
commercial autonomy to successful, profit-making companies functioning in competitive
environment; they won’t be privatised. ‘Navratna’ companies can procure resources from the
capital market. Efforts will be made to modernise and restructure sick PSEs.
1. It favoured sale of small proportions of Government equity through IPO/FPO without
altering the character of PSEs. In relation to this, it sanctioned listing of unlisted profitable
CPSEs subject to residual equity of the Government remaining at least 51% and Government
recollecting the control of management.
2. It also comprised the formation of the ‘National Investment Fund’, where the advances
from disinvestment of CPSEs would be channelised. 75% of annual income of NIF would
be used to finance selected Social Sector Schemes—health, education, employment and the
rest 25% to fulfil the capital investment needs of profitable and revivable CPSEs.
You may already be aware that on 27 January 2005, the Government sanctioned in principle:
1. Listing of currently unlisted profitable CPSEs, each with a Net Worth in excess of ` 200
crore, through an Initial Public Offering (IPO) either in combination with a fresh equity
issue by the CPSE associated or independently by the Government, on a case-by-case
basis, subject to the residual equity of the Government remaining at least 51 per cent and
the Government retaining management control of the CPSE.
2. Sale of minority shareholding of the Government in listed, lucrative CPSEs either in
conjunction with a Public Issue of fresh equity by the CPSE apprehensive or independently
by the Government, subject to the residual equity of the Government remaining at least
51% and the Government retaining management control of the CPSE.
3. Constitution of a “National Investment Fund.”

Notes On 25 November 2005, the Government decided, in principle, to list large, profitable
CPSEs on domestic stock exchanges and to selectively sell small portions of equity in
listed, profitable CPSEs (other than the Navratnas).

Present Policy of Disinvestment

It is important to note that the present disinvestment policy has been pronounced in the recent
President’s addresses to Joint Sessions of Parliament and the Finance Minister’s recent Parliament
Budget Speeches.

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