{"id":64060,"date":"2026-01-12T18:32:44","date_gmt":"2026-01-12T13:02:44","guid":{"rendered":"https:\/\/www.nextias.com\/ca\/?p=64060"},"modified":"2026-01-14T12:28:21","modified_gmt":"2026-01-14T06:58:21","slug":"pse-privatisation-cii","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/current-affairs\/12-01-2026\/pse-privatisation-cii","title":{"rendered":"Faster, Demand-led Approach Needed for PSEs Privatisation: CII"},"content":{"rendered":"\n<p><strong>Syllabus: GS3\/Economy<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Context<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Recently, the <strong>Confederation of Indian Industry (CII), <\/strong>in its recommendations for the <strong>Union Budget 2026\u201327<\/strong>, has urged the government to adopt a faster, demand-led approach to the privatisation of <strong>Public Sector Enterprises (PSEs).<\/strong><\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-background has-fixed-layout\" style=\"background-color:#ebecf0\"><tbody><tr><td><strong>About Public Sector Enterprises (PSEs)<\/strong><br><br>&#8211; These are <strong>government-owned corporations<\/strong> or <strong>state-owned enterprises having <\/strong>majority stake (51% or more).<br>a. These include sectors like energy, steel, telecommunications, transportation, and finance.<br>b. They are categorized into:<br>1. Central Public Sector Enterprises (CPSEs);<br>2. State Level Public Enterprises (SLPEs)<br> <br>&#8211; They are primarily overseen by the <strong>Department of Public Enterprises (DPE)<\/strong> under the <strong>Ministry of Finance.<\/strong><br>&#8211; <strong>Classification of CPSEs:<\/strong><br>a. <strong>Maharatna<\/strong>: Large, highly profitable CPSEs with significant global presence (e.g., ONGC, NTPC).<br>b. <strong>Navratna<\/strong>: CPSEs with operational autonomy and strong financials (e.g., BEL, HAL).<br>c. <strong>Miniratna<\/strong>: Smaller CPSEs with consistent profits and operational flexibility.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Disinvestment of Public Sector Enterprises (PSEs)<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>It refers to the process by which the government reduces its stake in state-owned enterprises, <strong>either partially or fully.<\/strong><\/li>\n\n\n\n<li>It aims to infuse market efficiency, attract private investment, and reduce the fiscal burden on the government.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Historical Context<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Former Prime Minister Jawaharlal Nehru envisioned PSEs as<strong> \u2018temples of modern India\u2019.<\/strong>\n<ul class=\"wp-block-list\">\n<li>However, by the 1980s, issues of <strong>inefficiency, overstaffing, and financial non-viability<\/strong> plagued many PSEs.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>The <strong>disinvestment policy<\/strong> formally took <strong>shape in 1991<\/strong> under the <strong><em>New Industrial Policy<\/em><\/strong>, allowing private participation in state-owned enterprises.\n<ul class=\"wp-block-list\">\n<li>The<strong> objectives<\/strong> were to modernize PSEs through capital infusion; reduce the fiscal deficit; encourage wider share ownership by the public; and introduce competition and efficiency through market discipline.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Policy Framework and Mechanisms<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The <strong><em>Department of Investment and Public Asset Management (DIPAM)<\/em><\/strong> under the Ministry of Finance manages India\u2019s disinvestment programme.<\/li>\n\n\n\n<li>Key mechanisms include:\n<ul class=\"wp-block-list\">\n<li><strong>Minority Disinvestment:<\/strong> Government retains majority control while selling small equity stakes.<\/li>\n\n\n\n<li><strong>Strategic Disinvestment:<\/strong> Transfer of management control along with equity sale (e.g., Air India sale to Tata Group, 2021).<\/li>\n\n\n\n<li><strong>Exchange Traded Funds (ETFs):<\/strong> Government equity pooled in investment funds (e.g., CPSE ETF).<\/li>\n\n\n\n<li><strong>Buyback of Shares:<\/strong> PSEs buy back their own shares from the government.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Economic Rationale and Benefits<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Fiscal Consolidation:<\/strong> Disinvestment receipts provide non-tax revenue to bridge fiscal deficits.<\/li>\n\n\n\n<li><strong>Operational Efficiency:<\/strong> Private management brings modern governance and market responsiveness.<\/li>\n\n\n\n<li><strong>Market Development:<\/strong> Expands the depth and liquidity of India\u2019s capital markets.<\/li>\n\n\n\n<li><strong>Resource Optimization:<\/strong> Frees government resources for social and infrastructure spending.<\/li>\n\n\n\n<li><strong>Strategic Benefits:<\/strong>\n<ul class=\"wp-block-list\">\n<li>Mobilise non-tax revenues to support infrastructure and social sector spending.<\/li>\n\n\n\n<li>Improve operational efficiency of enterprises by leveraging private sector expertise.<\/li>\n\n\n\n<li>Attract global capital, especially in sectors like logistics, energy, and manufacturing.<\/li>\n\n\n\n<li>Reduce fiscal burden by offloading loss-making or non-strategic assets.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Challenges and Concerns<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Valuation Concerns:<\/strong> Critics argue that assets are sometimes undervalued during sale.<\/li>\n\n\n\n<li><strong>Employment Impact:<\/strong> Fear of job losses due to private restructuring.<\/li>\n\n\n\n<li><strong>Political Opposition:<\/strong> Privatization of strategic or culturally sensitive sectors (e.g., railways, oil) often faces protests.<\/li>\n\n\n\n<li><strong>Execution Delays:<\/strong> Bureaucratic processes slow down strategic disinvestment.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Confederation of Indian Industry (CII)\u2019s Recommendations<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Calibrated Disinvestment to Unlock Market Value: <\/strong>CII\u2019s analysis suggests that reducing the government\u2019s stake to <strong>51% in 78 listed PSEs<\/strong> could unlock close to <strong>\u20b910 lakh crore<\/strong> in value.\n<ul class=\"wp-block-list\">\n<li>A <strong>phased reduction<\/strong> of the government\u2019s stake to 51%, and later to <strong>33\u201326%<\/strong>, would preserve strategic control while freeing up productive capital for <strong>infrastructure and social investment<\/strong>.\n<ul class=\"wp-block-list\">\n<li><strong>Phase 1:<\/strong> Target 55 PSEs with government holdings of <strong>75% or less<\/strong>, potentially mobilising <strong>\u20b94.6 lakh crore<\/strong>.<\/li>\n\n\n\n<li><strong>Phase 2:<\/strong> Disinvest 23 PSEs with <strong>over 75% government stake<\/strong>, raising an additional <strong>\u20b95.4 lakh crore<\/strong>.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Rolling Three-Year Privatisation Pipeline:<\/strong> This <strong>predictable and transparent roadmap<\/strong> would:\n<ul class=\"wp-block-list\">\n<li>Enable <strong>better investor engagement and valuation<\/strong>.<\/li>\n\n\n\n<li>Facilitate <strong>realistic price discovery<\/strong>.<\/li>\n\n\n\n<li>Accelerate execution by aligning investor expectations with government timelines.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Demand-Driven Selection of Enterprises: <\/strong>CII urged a <strong>reversal of the existing privatisation sequence<\/strong>, highlighting current procedural bottlenecks.\n<ul class=\"wp-block-list\">\n<li>Instead of identifying PSEs first and seeking buyers later, the government should:\n<ul class=\"wp-block-list\">\n<li><strong>Gauge investor interest<\/strong> across a wide set of enterprises.<\/li>\n\n\n\n<li><strong>Prioritise those attracting stronger demand<\/strong> and meeting valuation thresholds.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Institutional Framework for Oversight and Governance: <\/strong>CII proposed the creation of a <strong>dedicated institutional framework <\/strong>to enhance transparency and professional management of the disinvestment process. It comprises:\n<ul class=\"wp-block-list\">\n<li>A <strong>Ministerial Board<\/strong> for strategic direction.<\/li>\n\n\n\n<li>An <strong>Advisory Board<\/strong> of industry, financial, and legal experts for independent benchmarking.<\/li>\n\n\n\n<li>A <strong>Professional Management Team<\/strong> to oversee due diligence, execution, and market engagement.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Road Ahead<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The government\u2019s <strong><em>National Monetisation Pipeline (NMP)<\/em><\/strong> and <strong><em>Strategic Disinvestment Policy (2021)<\/em><\/strong> signify a structured, long-term approach.\n<ul class=\"wp-block-list\">\n<li>The focus has shifted from mere <strong>revenue generation to \u2018asset recycling\u2019<\/strong> where proceeds from disinvestment are reinvested in infrastructure.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>The<strong> <\/strong><strong><em>Economic Survey 2023\u201324<\/em><\/strong> underscores the need for transparency, strong valuation frameworks, and social safeguards to make privatization both efficient and equitable.<\/li>\n\n\n\n<li>The <strong><em>India Vision 2036\u201337<\/em><\/strong><strong> report<\/strong> emphasizes sustained reform through:\n<ul class=\"wp-block-list\">\n<li>Improved asset valuation mechanisms.<\/li>\n\n\n\n<li>Broader retail participation in disinvestment.<\/li>\n\n\n\n<li>Strengthened governance frameworks for privatized entities.<\/li>\n\n\n\n<li>Reintegration of disinvestment proceeds into welfare and infrastructure development.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<p><a href=\"https:\/\/www.thehindu.com\/business\/Economy\/faster-demand-led-approach-needed-for-pse-privatisation-cii\/article70498231.ece\" target=\"_blank\" rel=\"noopener\">Source: TH<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p><strong> Context <\/strong><\/p>\n<li class=\"ms-5\"> Recently, the Confederation of Indian Industry (CII), in its recommendations for the Union Budget 2026\u201327, has urged the government to adopt a faster, demand-led approach to the privatisation of Public Sector Enterprises (PSEs). <\/li>\n<p><\/p>\n<p><strong> Disinvestment of Public Sector Enterprises (PSEs) <\/strong><\/p>\n<li class=\"ms-5\"> It refers to the process by which the government reduces its stake in state-owned enterprises, either partially or fully. <\/li>\n<li class=\"ms-5\"> It aims to infuse market efficiency, attract private investment, and reduce the fiscal burden on the government. <\/li>\n<p><a href=\"https:\/\/www.nextias.com\/ca\/current-affairs\/12-01-2026\/pse-privatisation-cii\" class=\"btn btn-primary btn-sm float-end\">Read More<\/a><\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-64060","post","type-post","status-publish","format-standard","hentry","category-current-affairs"],"acf":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/64060","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=64060"}],"version-history":[{"count":3,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/64060\/revisions"}],"predecessor-version":[{"id":64168,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/64060\/revisions\/64168"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=64060"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=64060"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=64060"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}