The new public sector enterprises (PSE) policy and its impacts

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The new public sector enterprises (PSE) policy and its impacts

  • The Secretary of Department of Investment and Public Asset Management (DIPAM) said the new public sector enterprises (PSE) policy will keep following the process of off-loading government stake with an aim to have bare-minimum holding except in some strategic sectors.
  • The idea is to let the private sector envision the future of companies and let them test their capacities

Divestment in India

  • The Department of Investment and Public Asset Management (DIPAM) under the Ministry of Finance is the nodal department for the strategic stake sale in the Public Sector Undertakings (PSUs).
  • Disinvestment refers to the government's sale or liquidation of assets, mainly public sector firms, projects, or other fixed assets.
  • It is undertaken by the government to lessen the fiscal burden on the exchequer or to raise funds for specific purposes, such as bridging income shortfalls from other sources.
  • The government has revised its disinvestment estimate for the current financial year to ₹78,000 crore,which is a 55.4% reduction, and has set a target of ₹65,000 crore for 2022-23

Strategic disinvestment

  • It is the transfer of ownership and management of a public sector entity to another entity is known , transfer is mostly to a private sector entity

Strategic sale

  • It is defined by the disinvestment commission as the sale of a large portion of the government's shareholding in a central public sector enterprise (CPSE) of up to 50%, or such greater percentage as the authority determines,along with transfer of management control.
  • It entails a form of privatisation unlike simple disinvestment


  • The Dept of Disinvestment was renamed as the Department of Investment and Public Asset Management or ‘DIPAM’ in 2017
  • Its aim is to efficiently manage the centre’s investments in equity including its disinvestment in central public sector undertakings (CPSU).
  • Its mandate is to advise the government in matters of financial restructuring of CPSUs, attracting investment through capital markets , addressing issues such as capital restructuring, dividend, bonus shares, etc.

Need for divestment

  • To support economic recovery
  • To increase scope of spending in infrastructure projects
  • To make government enterprises more efficient and competitive
  • To endow govt enterprises with world class standards
  • To eliminate government’s involvement in non strategic areas

About New public sector enterprises (PSE) policy

  • It was declared by the government in May 2020 as part of the 'Aatmanirbhar Bharat Abhiyan' package that there will be a maximum of four public sector enterprises in critical sectors, with state-owned corporations in other segments eventually being privatised.

Key features of PSE policy

  • Strategic: Atomic energy, space, defence, trans and telecom, power, petro, coal, other minerals, banking, insurance and financial services will be classified as strategic sectors.
  • Privatisation: The remaining companies in strategic sectors will be considered for privatisation/merger/closure and non-strategic sectors will be considered for privatisation, where feasible or for closure.
  • In strategic sectors, the minimum presence of existing companies at the holding level will be retained under government control.
  • The strategic sectors have a limited number of players restricting it to a maximum four public sector enterprises of the holding nature.

Issues associated with privatisation of PSEs

  • Helpful in increasing global footprint of India
  • Biggest asset creators
  • Key generator of safe and secure employment in country
  • Trustworthy in creating infrastructure and contribute in the nation’s development since independence


  • The private sector has a role to play in economic growth, but the contributions of PSEs cannot be overlooked so the govt should deliberate on the policies and take the steps while consulting all the stakeholders