History of disinvestment in India

by Sudipto Banerjee, Renuka Sane, Srishti Sharma and Karthik Suresh.

Disinvestment of public sector enterprises has been an important part of Indian economic policy since the 1990s. Research in this field has been constrained by a lack of foundations of facts. There is limited information on policy positions, policy actions, as well controversies around policy actions. For example, Baijal (2008) provides a history of early disinvestment decisions in India; Banerjee Sane and Sharma (2020) provide information on the more recent methods adopted for disinvestment; Banerjee, Moharir and Sane (2020) document disinvestments undertaken to meet the minimum public shareholding rule in India.

In a new working paper, History of disinvestment in India: 1991-2020, we contribute to the literature by documenting the history of disinvestment of Central Public Sector Enterprises (CPSEs) in India between March 1991 to December 2020. The paper is a collection of facts on:

1. The policy position of governments across the years
2. The policy processes adopted by governments on selection of enterprises for disinvestment
3. The difficulties encountered in various transactions on (i) methods of valuation, (ii) legal disputes challenging the transactions, (iii) adverse audit remarks of the CAG, and (iv) labour unrest.
4. Targets for disinvestment and amounts raised
5. The different methods of disinvestment, especially those used in recent years such as compulsory buybacks, Offer for sale through the stock exchange (OFS-SE), CPSE to CPSE sales, Exchange Traded Funds (ETFs), and public offers.

We found it difficult to achieve this level of clarity on the facts, and hope that this helps many others approach the field with better foundations on facts.

References

Baijal, P. (2008), Disinvestment In India: I Lose and You Gain, Pearson; 1st edition.

Banerjee S., Moharir, S., and Sane R. (2020), The problem of minimum public shareholding in public sector enterprises , The Leap Blog, 18 November 2020.

Banerjee S., Sane R. and Sharma, S. (2020), The five paths of disinvestment in India , The Leap Blog, 7 July 2020.