What is meant by 'Strategic Disinvestment' ? Explain the different methods of Disinvestment adopted since…

Question

What is meant by 'Strategic Disinvestment' ? Explain the different methods of Disinvestment adopted since the re-christening of Department of Disinvestment (DOD) as Department of Investment and Public Asset Management (DIPAM). Briefly discuss the achievements and outcomes of these disinvestments.

Ghissu Editorial · Accepted Answer

Strategic disinvestment is the sale of a substantial government stake, often over 50%, together with transfer of management control to a private buyer. Since DIPAM's creation in 2016, methods include IPOs and OFS, buybacks, CPSE and Bharat-22 ETFs and strategic sales such as Air India to the Tata group (2022).

**Introduction**

Strategic disinvestment entails selling majority government stakes with management control transfer to private players, aiming to boost PSU efficiency and fiscal consolidation. DIPAM’s 2016 renaming signalled a broader asset management approach, reflecting a shift from mere equity sales to comprehensive public asset optimisation.

**Institutional Framework**

2. **Parliamentary Oversight**: Committees advocate time-bound disinvestment and fertiliser PSU modernisation, addressing delays⟦1⟧ in ageing PSUs. They have emphasised the need for modernisation in sectors like fertilisers to overcome institutional inertia and improve efficiency.

**Methods and Outcomes**

1. **Diverse Disinvestment Tools**: Minority stake sales via IPOs (LIC), ETFs (CPSE-ETF, Bharat-22), and strategic sales like Dredging Corporation’s transfer have raised significant funds and improved operations. Buybacks by PSUs have also been used to manage government holdings effectively.  
2. **National Monetisation Pipeline⟦2⟧ 2.0**: Targets ₹16.72 lakh crore (FY26–FY30), institutionalising asset monetisation to complement equity disinvestment and boost infrastructure financing, thereby expanding the government’s resource mobilisation avenues.  
3. **Challenges**: Delays in fertiliser and defence PSU disinvestments due to political resistance, valuation disputes, and strategic sensitivities highlight execution hurdles, as seen in prolonged timelines for National Fertilisers Limited and Rashtriya Chemicals and Fertilisers Limited.

**Way Forward**

2. **Align with Atmanirbhar Goals**: Use Defence Acquisition Procedure⟦4⟧⟦3⟧ 2020 to promote indigenous defence manufacturing while optimising PSU roles in strategic sectors.  
3. **Strengthen Oversight**: Time-bound targets and parliamentary monitoring to reduce delays and improve accountability in disinvestment processes.  
4. **Digital Platforms**: Leverage Digital India for efficient asset management and investor engagement, streamlining processes and expanding outreach.

**Conclusion**

Strategic disinvestment under DIPAM is key for fiscal health, private sector dynamism, and sustainable growth, aligning with national priorities and enabling the government to focus on social sector development.

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