DMPQ- What is strategic disinvestment? Critically examine the challenges associated with disinvestment?

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Disinvestment means the dilution of stake of the Government in a public enterprise. According to the government, strategic disinvestment would imply the sale of a substantial portion of the Government shareholding of a central public sector enterprises (CPSE) of upto 50%, or such higher percentage as the competent authority may determine, along with transfer of management control.

Challenges associated with disinvestment are:

  1. Loss of regular income to the Government 2. chances of “Asset Striping” by the strategic partner. 3. Strategic and National Security Concerns 4. Disinvestment affects labour forces’ social security. 5. Concerns about cronyism. 6. Using funds from disinvestment to bridge the fiscal deficit is an unhealthy and a short term practice. 7. Complete Privatisation may result in monopolies.

 

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