Current Affairs
Daily Bits

Disinvestment process

  • Posted By
    10Pointer
  • Categories
    Economy
  • Published
    29th Mar, 2022

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

 

Verifying, please be patient.

X