Loss-making national carrier Air India was privatized last year. And the government is going ahead with LIC disinvestment this year. Find out the difference between these two terms
The government sold Air India to the Tata group for Rs 18,000 crore last year. It got just 15% of the total amount while the rest went to the debtors. The Centre had been trying to offload its entire stake in the airline for years.
And after the nod of the Cabinet Committee on Economic Affairs, the government is now taking LIC to the primary market to divest some of its stakes. The government says that it just wants to go for an IPO and not for privatization.
We have also heard our Prime Minister Narendra Modi saying that “The government has no business being in business”. So the government’s intentions on privatization and disinvestment are very clear. But are these two terms different?
Let us start with disinvestment. It means the government or an organization is liquidating or selling its stake in a company. But it will be less than 50% and the government or the organization will still be in the saddle, calling the shots.
Governments often take this step to reduce their financial burden and re-allocate resources into other productive areas within a government-funded project or an organization.
It lowers the government's fiscal burden and provides funds for growth-oriented programs and development.
In 1999, the Indian government set up a separate department of disinvestment, which is today known as the Department of Investment and Public Asset Management or DIPAM. It operates under the Ministry of Finance.
The government announces its targets for disinvestment each year during the Union Budget. For the ongoing fiscal year FY22, the government has set a disinvestment target of Rs 1.75 lakh crore. The plan includes privatization of two public sector banks, public listing of the Life Insurance Corporation of India, Shipping Corporation of India, and many other PSUs.
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