India’s Disinvestment Strategy in FY25

India’s Disinvestment Strategy in FY25

Why in the News?

The Indian government's disinvestment receipts in FY25 have reached their lowest point since 2014-15, indicating a shift in strategy from aggressive stake sales to enhancing the performance of Public Sector Enterprises (PSEs).

Disinvestment Receipts:
As of FY25, the government has raised only Rs 9,319 crore through disinvestment, down from Rs 16,507 crore in FY24. This marks the lowest level of disinvestment receipts since 2014-15, despite the economic recovery post-pandemic.

Shift in Disinvestment Policy:
Since FY24, the government has moved away from setting annual disinvestment targets. Instead, it has adopted a "value creation" approach for PSEs. The new strategy focuses on increased capital expenditure, improved dividends, gradual market dilution, and strategic privatization when appropriate.

What is Disinvestment?
Disinvestment refers to the government's process of selling its stake in PSEs to raise funds, reduce fiscal burden, and encourage private sector participation. It includes:

• Strategic Disinvestment: A full or substantial stake sale, often with management transfer.

• Minority Stake Sale: A partial stake sale without transferring management control.

Disinvestment Methods:

• Initial Public Offer (IPO) for unlisted companies

• Further Public Offer (FPO) for listed companies

• Offer for Sale (OFS) for quick stake dilution

• Buyback of Shares to consolidate ownership or utilize surplus cash

• Exchange Traded Funds (ETFs)

The Department of Investment and Public Asset Management (DIPAM), under the Ministry of Finance, oversees the disinvestment process

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