Disinvestment means privatising ownership of Government undertaking by sale of equity shares. The disinvest may be full or partial, ie., the Government may either sell its entire share holding or a part of it to the general public. In the post independence era India was not industrialised and was basically a agriculture-oriented country. Industrialisation meant huge investment, capital was scarce and not easily available.
The private sector was not well developed and did not have the necessary resources to set up the heavy industries. The Government took upon itself the task of setting up of heavy industries like Steel, Petrochemicals, Telecom etc. The President of India owned the shares in these companies on behalf of the Government. Since these Companies / Corporations were owned by the Government they were called as the Public Sector Undertakings.
In the recent past disinvestment has assumed greater significance due to the Govt’s decision to sell its share holdings in various public sector enterprises. The Government of India has offered to sell its holdings in a few very successful public sector enterprises like ONGC, GAIL, IPCL, VSNL, Maruti Udyog, CMC etc.
Disinvestment is a measure towards participative ownership of the public sector enterprises. Till disinvestment process was set in motion the public sector enterprises were owned by the Government, which was a people’s representative. Now the general public is given a chance to own a share in the public sector enterprises to promote the concept of participative and joint ownership.
Till the early 1990s the Government’s policies were protectionist in nature and control oriented rather than supporting free enterprise, which resulted in technological backwardness and inefficiencies. I” the early 90’s there was a shift in the policy of the Government and the economy was opened up. The role of the Govertment is now only that of a regulator than that of a protector. This change in the policy has resulted in the Government’s decision to sell its stake in various Government owned enterprises or public sector enterprises.