Background of disinvestment?
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✿ Answer - In India, the new economic policy has given rise to significant focus for privatisation of public enterprises. Disinvestment is one of the methods of privatisation. It refers to selling of an investment. Disinvestment implies selling of Government equity shares of public sector units in the market.
It is a concrete step towards privatisation and liberalisation of our economy. The process of disinvestment was started in the year 1992. The privatization and disinvestment are not the same. Privatisation implies a change in ownership, resulting, in a change in a management.
The privatisation of public enterprises will occur only when the government sells more than 51 percent of its ownership to private entrepreneurs. Disinvestment on the other hand, has a much wider connotation as it could either involve dilution of government stake to a level that results in a transfer of management or could also be limited to such a level as would permit government to retain control over the organisation.
Disinvestment beyond 50 percent involves transfer of management, whereas disinvestment below 50 percent would result in the government continuing to have a major share in the undertaking.
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