Context
Recently, the government shows its reluctance toward a disinvestment plan for BSNLs in a statement in parliament.
What is the disinvestment process?
- Disinvestment involves the sales or liquidation of assets. It is the strategy used by the government to offload or disposes of its asset partially losing control of the stakes.
- This disinvestment policy is generally used by the government to allocate resources more efficiently.
- It is slightly different from the privatizations process which involves the 100 percent sale of government stake in PSUs wherein complete ownership and control are passed onto the buyers.
- India's Department of investment and public asset management (DIPAM) under the Ministry of Finance frames the disinvestment policy for the government.
Key advantages of disinvestment policy
- It helps the government in reducing its financial burden.
- Creates finances for the long-term government goals of growth and development in the country.
- Sometimes also used to manage the liquidity in the market by aiding consumption and demand as the need arises.
- Also used for the revival of growth and return on investment of nonperforming and underperforming assets.
- It encourages private sector investment in the country which eventually leads to better capital markets and efficient allocation of resources.
Strategic disinvestment process
It is a type of disinvestment that involves the transfer of ownership of a nonperforming organization to more efficient private players in the market and reduce the financial burden on the government balance sheet
