RAS question
The Disinvestment of Public Sector Enterprises means:
Correct answer: (C) Government selling its equity in public sector enterprises.
Disinvestment of public sector enterprises means the government selling all or part of its equity or shareholding in those enterprises.
Explanation
Disinvestment is about reducing the Government's ownership stake in public sector enterprises, not expanding it. It means the Government selling all or part of its equity, or shareholding, in PSEs to private investors or the public. DIPAM's disinvestment policy supports this meaning by listing two routes: strategic disinvestment or privatisation, and minority stake sale in CPSEs. In strategic disinvestment, the Government sells its entire or substantial shareholding along with transfer of management control; in privatisation, Government equity and management control move to a private strategic buyer. In minority stake sale, the Government sells a stake without transferring management control. So the common element is sale of Government equity in a public sector enterprise.
Why the other options are wrong
- (A) Increasing Government investment in PSEs would raise public ownership, whereas disinvestment means reducing Government shareholding through sale.
- (B) A merger of public and private companies is not the defining act here; disinvestment is specifically about sale of Government equity in a PSE.
- (D) Complete nationalisation transfers ownership towards the Government, while disinvestment transfers Government equity out of its hands.
Concept
This tests the Indian Economy concept of public sector reform, especially ownership change in CPSEs. It recurs in RAS because disinvestment, strategic sale and privatisation are standard policy tools in Government economic management.