What are the main objectives and achievements of policy of disinvestment in India?

The new industrial policy announced in 1991 envisaged disinvestment of part of government share holdings in the case of selected public sector enterprises to provide financial discipline and improve the performance of public enterprises.

The primary objective of disinvestments are:

i. Releasing the large amount of public resources locked up in non-strategic PSE, for redeployment in areas that are much higher on the social priority.

ii. Stemming further outflow of this scarce public resource.

iii. Reducing the public debt.

iv. It would expose the privatised company to market discipline, thus increasing their efficiency and productivity.

v. Disinvestment would result in wider distribution of wealth through offering of share to small investors and employees.

vi. Beneficial impact on capital market. Some achievements so far:

vii. Disinvestment in government equity has been completed in about 50 PSUs, and 20,000 crores have been realised.

viii. Sales of modern food rose more than 90%

ix. Salaries went up by an average of Rs. 1600.

x. BALCO employees saw salary hike by 20 %.

xi. Since January 2000 the PSU index on the BSE rose by 75%.

xii. The effect on public debt and interest payments is also appreciable. Government borrows at 10% so the money raised will lessen the debt service ratio.