What are the critical issues that must be addressed before implementing disinvestment policy?

Question

Ghissu Editorial · Accepted Answer

Before disinvestment, the government must settle clear institutional roles, transparent and fair valuation, protection of employees, safeguards against private monopolies, productive use of proceeds and market readiness. Coordination among DIPAM, NITI Aayog and states is needed so that sales support development rather than merely plug fiscal deficits.

**Introduction**

Disinvestment⟦1⟧, central to India’s reforms, gains urgency with National Monetisation Pipeline⟦2⟧ 2.0, requiring critical issue resolution for effective implementation, especially in ==Andhra Pradesh==.

**Governance and Institutional Preparedness**

1. **Parliamentary Committee Role**: The Standing Committee on Chemicals and Fertilisers⟦3⟧ demands time-bound disinvestment and modernisation of fertiliser PSUs, addressing delays harming ==Andhra Pradesh’s agrarian economy==.  
2. **Regulatory Strengthening**: Adherence to the Depositories Act (1996) and Kotak Committee (2017) reforms is essential for transparency and investor trust in PSU governance.  
3. **Clear Institutional Roles**: Defining roles for DIPAM, NITI Aayog, and state bodies like ==Andhra Pradesh’s Finance Department== ensures coordination and effective policy execution.

**Implementation Challenges and Socio-Economic Impact**

4. **Employee Welfare and Social Security**: Disinvestment must safeguard PSU employees with transition schemes, especially in states like ==Andhra Pradesh== with large PSU workforces.  
6. **State-Centre Coordination**: Collaboration between the Centre and ==Andhra Pradesh== is vital to align disinvestment with regional development and employment priorities.

**Fiscal and Market Considerations**

7. **Asset Monetisation and Market Readiness**: National Monetisation Pipeline 2.0 institutionalises asset sales, including ==Visakhapatnam port==, requiring phased, transparent execution to maintain services and attract investors.  
8. **Legal Framework Enhancements**: Proposed IBC amendments of 2025⟦4⟧, including a creditor-initiated insolvency process and stronger committee of creditors powers, could speed up resolution of stressed assets.  
9. **Fiscal Deficit Management**: Disinvestment must fit within broader fiscal consolidation, mindful of ==Andhra Pradesh’s revenue-deficit grant demands== under the Finance Commission.

**Way Forward**

11. **Strategic Use of Proceeds**: Channel funds into social infrastructure like the Polavaram irrigation project, supporting inclusive growth in ==Andhra Pradesh==.

**Conclusion**

Robust governance, parliamentary oversight, and socio-economic safeguards are crucial for disinvestment to enhance PSU efficiency without compromising regional development or social welfare.

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