Economic Survey:A Temasek-like model to put divestment on aggressive track

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News:The Economic Survey 2019-20 has proposed a new structure of disinvestment called Temasek-like model to maximise returns from public sector enterprise.

Facts:

About Divestment:

  • Disinvestment is defined as the action of an organisation (or government) selling or liquidating an asset or subsidiary.

Economic Survey on Divestment:

  • The survey examined the realized efficiency gains from privatization in the Indian context and bolsters the case for aggressive disinvestment of CPSEs.
  • It presented an analysis of the before-after performance of 11 CPSEs which underwent strategic disinvestment from 1999-2000 to 2003-04.
  • It found that Financial indicators such as net worth, net profit, return on assets (ROA), return on equity (ROE) of the privatized CPSE’s on an average have improved significantly.

Benefits of divestment:The survey has suggested aggressive disinvestment of CPSEs which will lead to 

  • higher profitability.
  • Promotes efficiency.
  • Increases competitiveness.
  • Promotes professionalism.

About Temasek-like model:

  • Temasek like model is based on the experience of Singapore’s Temasek Holdings Company.
  • Under this model,the government can transfer its stake in the listed CPSEs to a separate corporate entity. 
  • This entity would be managed by an independent board and would be mandated to divest the government stake in these CPSEs over a period of time.
  • This will lend professionalism and autonomy to the disinvestment programme which in turn would improve the economic performance of the CPSEs.