Consolidation and Strategic sale of PSUs and New PSE policy

Subject: Economy

Context:

Government is looking for second “generation reform” that is necessary to give a structural push to growth by consolidating and privatizing CPSEs.

Concept:

• Finance Minister  said a new coherent PSE policy will be announced, opening all sectors to private players with public sector enterprises (PSEs) playing an important role in defined areas.
• The policy on Public Sector Enterprises will make it very clear, strategic sector and non-strategic sectors.
• In strategic sectors, at least one enterprise will remain in the public sector but private sector will also be allowed. To minimize wasteful administrative costs, number of enterprises in strategic sectors will ordinarily be only one to four; others will be privatized or merged or brought under holding companies.
• The policy on PSEs is being prepared in consultation with NITI Aayog. NITI Aayog has earlier finalised a list of government companies and their individual assets for strategic sale.
• Currently, there is no clear definition of strategic sector.
• According to department of public enterprises document, strategic areas include arms & ammunition and the allied items of defence equipments, defence aircrafts and warships; atomic energy (except in the areas related to the operation of nuclear power and applications of radiation and radio-isotopes to agriculture, medicine and non-strategic industries); and railway transport.
• Disinvestment of government stakes in companies have become a major source of non-tax revenue in recent years with collections of Rs 1 lakh crore in FY18, Rs 85,000 crore in FY19 and Rs 50,300 crore in FY20. With market conditions not conducive, the Centre might nearly halve the disinvestment revenue target of Rs 2.1 lakh crore for FY21.