Disinvestment of PSU

Disinvestment of PSU upto 10% in next 5 years will not only provide fund to govt but also help in increasing transparency , competitiveness and responsibility in PSU. Some PSU's like MMTC Limited has less than 1% stake in market , that too with Financial Institutes. This has not only lead to reduced liquidity of equity in market but also artificially escalated the price of stock.

Disinvestment of listed PSU in next three years will bring approx 3,41000 Cr ,unlisted PSU's will bring 24000 cr and 17000 cr From PSU banks. If we assume it to be spreaded over 5 years time span, this disinvestment could provide resources of the tune of 0.88 % of GDP.

government has decided to spend all the resources on social sector. As we know our economy is growing at faster rate and we require resources for building up of basic infrastructure and projects National action plan on climate change will require enormous investment to increase supply of solar power.It has been recommended in 13th finance commission to invest proceedings of disinvestment in other non-social projects of national importance.

There are few issues concerning compulsory public holding of 25% in listed companies.
1. non-PSU companies are required to have min 25% public holding While PSU companies are required to ensure min. 10% public share holding. Mere listing of PSU by 10% public holding may not increase performance of PSUs.
2. The word "Public share holding" as not been defined clearly , whether shares with group companies are included in "Public share holding" or share holding by FI is also in public share holding.For example Hindustan Photo Films (PSU), 90% of shares are with govt of india and approx 10% are with PSU insurance companies.
3. Indian individual are not holding significant portion in equity market. While govt. has claimed that disinvestment of PSU will give opportunity for public to participate in economic growth of country but with unclear definition of Public Share Holding and lesser participation of individual in equity market will not lead to inclusion of masses in economic growth.

With huge amount of disinvestment , it is belived that market will not able to raise fund and hence all non-promotors have been included in "Public". With 10% disinvestment of PSU and unclear defination of "Public" will neither lead to better management of PSUs nor will help in financial inclusion of masses.