Cabinet approves strategic disinvestment of BPCL,4 other PSUs

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News:Union Cabinet chaired by the Prime Minister has approved the strategic disinvestment of BPCL and four other Public Sector Units(PSUs).

Facts:

About the units for disinvestment:The Public Sector Units approved for strategic disinvestment are 

  • Bharat Petroleum Corp Ltd (BPCL).The Numaligarh Refinery Limited operating under BPCL is excluded.
  • Shipping Corporation of India (SCI)
  • Container Corporation of India (CONCOR)
  • Tehri Hydro Development Corporation India Limited (THDCIL) and 
  • North Eastern Electric Power Corporation Limited (NEEPCO).

About Disinvestment:

  • Disinvestment is defined as the action of an organisation or government selling or liquidating an asset or subsidiary.It is also referred to as divestment.
  • In the case of Public Sector Undertakings(PSU) disinvestment means Government selling/ diluting its stake (share) in PSUs in which it has a majority holding.
  • Disinvestment is carried out as a budgetary exercise under which the government announces yearly targets for disinvestment for selected PSUs.
  • Department of Investment and Public Asset Management (DIPAM) under the Ministry of Finance is the nodal department for the strategic disinvestment sale.
  • Government has set the disinvestment target of 1.05 lakh crore for the current financial year 2019-20.

Significance of disinvestment:

  • It improves the structure of incentives and accountability of PSUs in India.
  • It can help in the revival of loss-making public sector enterprises(PSU).
  • It can help in financing the increasing fiscal deficit.
  • It can also finance the large-scale infrastructure development, defense, education and healthcare projects.

Concerns on disinvestment:

  • The process of disinvestment is not favoured socially as it is against the interest of socially disadvantageous people.
  • After disinvestment, the employees of Public Sector Units(PSUs) will lose their jobs.
  • Government’s dividend income will also decline as it will have less shares in the PSUs.