Government has empowered the inter-ministerial body – the Alternative Mechanism to take most of the decisions on strategic disinvestment. Formed in 2017, the AM’s role was setting the terms and conditions of strategic sale; but now bulk of the decisions on strategic disinvestment is to be made by the body.
The AM is led by Finance Minister and includes Road Transport Minister (Nitin Gadkari) and the minister representing the administrative department concerned.
Finance Minister Arun Jaitley after the Cabinet meeting said that the Cabinet Committee on Economic Affairs (CCEA) has empowered the AM to look into the strategic sale of Central Public Sector Enterprises (CPSEs).
Strategic disinvestment is the transfer of a PSE into the private hands and here, the selection of the PSE, pricing, mode of sale etc., are critical from several angles including revenue realisation.
AM is now having full control of strategic disinvestment
Major decisions associated with strategic sale including the quantity of shares to be sold, the mode of sale and the final pricing of the transaction etc. are to be decided by the AM.
Similarly, decision of designing the principles/guidelines on pricing of shares, the selection of strategic partner/buyer, and the terms and conditions of sale are also to be decided by the AM. The AM can also decide on the timing of the sale and any other related issue regarding the transaction.
Strategic disinvestment is the mode of disinvestment where the government is transferring the ownership and control of a public sector company into private entities. Practically, it is selling the PSE to the private sector.
Till now, the NITI Ayog was in charge of the critical strategic sale decisions. The Department of Investment and Public Asset Management (DIPAM) that is with the Finance Ministry was playing a minor role.
The AM earlier decided only the terms and conditions of the CPSE sale from the stage of inviting of expressions of interest (EoIs) till inviting of financial bid.
Now, most of the decisions related to strategic disinvestment are vexed with the Ministry of Finance.
Though the government has given in-principle approval for the strategic sale of 24 state-owned firms for 2018-19, difference in land prices and other asset prices of PSEs has slowed down the target. The NITI Ayog that is in charge of the process is yet to make progress on strategic disinvestment. This has led to low realisation of disinvestment receipts.
Transferring the responsibilities to the inter-ministerial body is expected to quicken the strategic sale process.
For 2019-20, the disinvestment target is targeting Rs 90000 crores.
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