DISINVESTMENT (Syllabus: GS Paper 3 – Economy)

Context: The Centre may aim for a modest disinvestment target of around Rs 30,000 crore in 2024-25, 40% lower than the target of Rs 51,000 crore for the current financial year, which is set to be missed by 60%

Disinvestment

• About: Disinvestment entails the sale or liquidation of assets, typically undertaken by the government, including Central and state public sector enterprises, projects, or fixed assets. In certain instances, disinvestment may
• Aim: To privatize assets, but not all disinvestment leads to privatization.
• Objectives: To alleviate the fiscal burden on the exchequer, contributing to better fiscal management.

oTo enhance public finances, leading to more sustainable economic practices.

oTo generate funds for growth and development programs, supporting the overall progress of the nation.

Evolution of Disinvestment in India

• Rangarajan Committee's Emphasis: The Rangarajan committee in 1993 underscored the necessity for substantial disinvestment, paving the way for policy developments.
• Creation of Department: The establishment of the Department of Disinvestment in 1999, later upgraded to a full Ministry in 2001, marked a significant phase in disinvestment policy.
• Ministry Restructuring: In 2004, the Ministry of Disinvestment was merged with the Finance Ministry as an independent department.
• DIPAM Formation: The Department of Disinvestments was renamed as the Department of Investments and Public Asset Management (DIPAM) in 2016, now serving as a nodal department for disinvestment.

Benefits of Disinvestment

• Disinvestment provides the government with much-needed funds, aiding in fiscal management.
• Proceeds from disinvestment are utilized to finance the fiscal deficit and invest in economic, developmental, or social sector programs.
• Disinvestment contributes to the long-term growth of the country by reducing government and company debt.