Several PSUs Will Be Shut Down; Even Those Which Are Up For Sale, Disinvestment

The Government may shut down the public sector units (PSUs) even if they have been ‘approved for strategic divestment on case to case basis’.

Read on to find out more…

Why Will Some PSUs Permanently Close?

The government has given ‘in-principle’ approval for strategic disinvestment of 34 central public sector enterprises (CPSEs), its subsidiaries, and units.

Currently, many CPSEs in India are financially burdened and making losses. The challenges in divesting such in-debt, loss-making entities is a challenge the government has faced numerous times in the past. 

Therefore, such sick companies with little value might be recommended to shut down completely.

However, some CPSEs, might undergo minority stake sale through various Securities and Exchange Board of India (SEBI) approved methods. This will ensure value, promote public ownership, and a higher degree of accountability without the transfer of management.

PSU Closure A Part Of a Policy?

Minister of State for Finance Anurag Thakur said that the government follows a policy of closure of CPSEs in terms of the approved revised guidelines issued by the Department of Public Enterprises (DPE) dated June 14, 2018. They also address issues regarding the employees and assets of the CPSEs, he said. 

“The government may consider the closure of the CPSEs even in cases earlier approved for strategic disinvestment on a case to case basis,” Thakur added. 

Thakur said, “Transaction receipts on the conclusion of disinvestment transactions depend on the prevailing market conditions and investors` interest.”

The Divestment Plans of The Government!

The budget estimate (BE) of disinvestment of CPSEs for 2020-21 was set at Rs 1.20 lakh crore.

The ongoing COVID-19 pandemic has slowed down the strategic divestment plans of PSUs like Air India, Bharat Petroleum among others. 

To tackle the new concerns, the Finance Minister in May announced that a new strategic disinvestment policy is underway. This policy might include insurance and banking sector PSUs as well, said sources.