While elucidating the objectives and achievements of the policy of disinvestment in India, critically examine why year after year, the government fails to achieve the disinvestment targets.

Published: May 10, 2017

The disinvestment policy of India introduced in July 1991 named as the New Economic Policy had the following objectives in mind:

  • To reduce burden of development from the Public Sector Undertakings by shifting some non-core government activities to the private sector.
  • To make the industries more efficient by exposing them to competition and market discipline.
  • To make the excess funds earlier being applied for PSUs to be applied to finance the fiscal deficit, infrastructure development and in social programs.

The achievements of the disinvestment policy are:

  • The budgetary targets of investment are increasingly being made and the PSUs are subjected to more competition
  • The new policy for disinvestment brings in a new reform. Now the aim has been shifted from selling the shares to the private sectors to trade the shares of these PSUs in the stock exchange and encourage the public instead to buy the shares and be a contributor. This will lead to less government interference and working of PSUs by the commercial methods to a large extent.

The disinvestment policy has failed due to the following reasons:

  • The government has constantly failed to meet the budget targets for disinvestment. The UPA government had failed to meet all targets. The NDA led government could raise only two-third targets but has also doubled the disinvestment targets.
  • The problem was also seen in the way sale of the shares was carried out. A lot of corruption was reported while selling the shares of these PSUs to the private sector. The issue reached to such an extent that the Supreme Court had in 2003 stopped the process of disinvestment of Hindustan Zinc Ltd. on the grounds of irregularities in the process.

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