1. The new Industrial policy announced in 1991 envisaged disinvestment on the part of government share holding in the case of selected PSE’s to provide financial discipline and improve the performance of public enterprise, it was decided to disinvest up to 20% of the government equity in selected PSU’s and yield Rs. 25000 crores to the exchequer by the whole exercise.
2. In 1993 the Rangarajan committee recommended the need for substantial disinvestment. It stated that the percentage of equity to be diverted could be up to 49% for industries explicitly reserved for the public sector. Barring a few exceptional cases, it recommended 100% disinvestment of government stake. Holding of 51% or more equity by the government was recommended only for 6 industries viz – coal, mineral oil, arms and defence equipment, atomic energy, radioactive minerals and railway transport.
3. In 1996, the united front government set up a disinvestment commission. It made recommendation on 58 PSE’s and the mode of disinvestment recommendation was the following:
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4. The government on 16th March 1999, classified industries into strategic [arms and defence equipment, atomic energy and railways] and non-strategic areas for the purpose of disinvestment. The government also decided to bring government shareholding in non-strategic PSU’s to 26%.
5. In 1999-2000 the government policy was to strengthen strategic PSU’s through gradual disinvestment or strategic sale and device viable rehabilitiation for weak units. The highlight of this policy was that the expression PRIVATISATION was used for the first time.
6. In the budget 2000-01, the main elements of the disinvestment policy were enunciated, which are as follows:
- Restructure and revive potentially viable PSE’s
- Closedown PSE’s which cannot be reviewed
- Bring down government equity in all non strategic PSE’s to 26% or lowers if necessary
- Fully protect the interest of workers.
- Emphasis increasingly on strategic sales of identified PSE’s.
- Use the entire receipt from disinvestment and privatization for meeting expenditure in social sector, restructuring of PSE’s and retiring public debt.
- Setting up of Ministry of Disinvestment (Department of Disinvestment was set up in December 1999 and is made a fully fledged Ministry under government of India).