Page 38 - IMDR JOURNAL 2020-21

IMDR’s Journal of Management Development and Research 2020-21

DISINVESTMENT
Varda Sanjeev Sakrikar, Akshay Vasant Dabhole
Institute of Management Development and Research, Pune

Abstract: in a special sense. By disinvestment we mean the
The aim of this paper is to give fair idea about sale of shares of public sector undertakings by the
disinvestment . this papers gives the history of government. The shares of government companies
disinvestment , definition of disinvestment ,changes held by the government are earning assets at the
in government policy This paper also tries to disposal of the government. If these shares are sold
answers questions related to disinvestments like why to get cash, then earning assets are converted into
disinvestment, how much disinvestment , process of cash. So it is referred to as disinvestment.
disinvestment . This paper also gives a brief about
Disinvestment issues and conclusion. 1.2 Change In Government Policies Towards
Public Sector
Key Words: Disinvestments, Government In 1991 , when the industrial policy was adopted
Policies, Public sector. , there was a drastic change in governments policy
towards public sector . In the industrial policy of
1. Introduction 1991 , only eight industries have been reserved for
For the first four decades after Independence, the public sector . these eight industries include
the country was pursuing a path of development in defense , production , atomic energy , coal and
which the public sector was expected to be the engine lignite , mineral oils, iron ores ,manganese , goal and
of growth. However, the public sector overgrew diamond , atomic minerals and railways . It has also
itself and its shortcomings started manifesting in been stated that if need arises private sector units
low capacity utilization and low efficiency due to may also be permitted to enter these industries. Thus
over manning, low work ethics, over capitalization in the new industrial policy there is no such thing as
due to substantial time and cost over runs, inability the exclusive preserve of the public sector. In the new
to innovate, take quick and timely decisions, large policy it has been stated that the government will run
interference in decision making process etc. Hence, the public sector on sound commercial principles.
a decision was taken in 1991 to follow the path of The government will not interfere in the day to day
Disinvestment. functioning of the public sector units. Instead these
units will be controlled by the government through
1.1 Definition Of Disinvestment : memorandum of understanding (MOU) reached
The term, Disinvestment is the opposite of the between these units and the government. Another
term, Investment. Investment is acquisition of important feature of the new policy on public sector
earning. is disinvestment of some selected public sector units.
The term disinvestment is opposite to the term The new policy also suggests that the government
investment. Investment is acquisition of assets with will provide more independency to the public sector
help of money. units . There is also a provision for rehabilitation of
The term, Disinvestment‟ is the opposite of the the workers working in affected units where a social
term „Investment‟. Investment is acquisition of security net will be created. Another feature is that
earning. 20% of the shares of selected profit making public
sectors will be sold to financial institutions , mutual
For example if bonds are purchased or shares of funds etc.
companies are purchased by
spending money it is known as investment. In the 1.3 WHY Disinvestment ?
case of investment money is converted into earning The demand of government at center and state
asset to earn income. On the other hand in the case are increasing . Government’s resources are limited.
of disinvestment an earning asset is converted into These resources should be well distributed to social
liquid cash. Here we shall use the term disinvestment prirority on basis of health , family, education,
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