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What is Divestment or disinvestment

Divestment or disinvestment

About Divestment or disinvestment

What is Divestment or disinvestment

Divestment or disinvestment means selling a stake in a company, subsidiary or other investments. Businesses and governments resort to divestment generally as a way to pare losses from a non-performing asset, exit a particular industry, or raise money. 
 
Governments often sell stakes in public sector companies to raise revenues. In recent times, the central government has used this route to exit loss-making ventures and increase non-tax revenues. 
 
The Indian government started divesting its stake in public-sector companies in the wake of a change of stance in economic policy in the early 1990s — commonly known as 'Liberalisation, Privatisation, Globalisation'. This has helped the Centre pare its fiscal deficits.
 
The Bharatiya Janata Party-led National Democratic Alliance (NDA) government in its first term under Prime Minister Atal Bihari Vajpayee made strategic disinvestment in key PSBs like Bharat Aluminium Company (Balco) and Hindustan Zinc (both to Sterlite Industries), Indian Petrochemicals Corporation Limited (to Reliance Industries) and VSNL (to the Tata group).
 
During the second term of the NDA, the first Narendra Modi-led government tried to exit debt laden Air India, without success. Even so, it exceeded its divestment target of Rs 72,500 crore in 2017-18. This was mainly achieved by the method of strategic cross-divestment — where one PSU buys a stake in another, helping the government raise revenues but keep the company's control with itself all the same. Other routes were listing of insurance companies, mergers of public sector companies, CPSE exchange-traded funds (ETFs) and numerous buybacks.
 
Future divestment strategy
 
The much-anticipated sale of Air India, and its subsidiaries did not attract a single bid in 2018-19. It has still not happened. The government also issued an Expression on Interest for the strategic disinvestment of Pawan Hans, Bharat Petroleum Corporation Limited, and Bharat Earth Movers Limited in the current financial year.
 
 

Latest Updates on Divestment or disinvestment

You started privatisation in 1991: Sitharaman to Cong in Rajya Sabha

Congress initiated the privatisation process in 1991 and disinvestment of worth over Rs one lakh crore was made in 1991 and the following years, she said

Updated On : 11 Feb 2022 | 3:51 PM IST
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Best of BS Opinion: India's fight against Covid, the GDP estimation debate

Here is the best of Business Standard's opinion pieces for Friday

Updated On : 31 Dec 2021 | 6:30 AM IST
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Final bids for Air India disinvestment today, Tata group also in race

The government is expected to complete the sale of the national carrier with at least two buyers expected to submit financial bids by September 15

Updated On : 15 Sep 2021 | 2:55 PM IST
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BPCL disinvestment process slows down due to pandemic, LIC IPO: Report

The disposal may only take place as soon as early next year rather than in 2020, one of the people said, asking not to be identified as the matter is private

Updated On : 19 Jul 2021 | 6:24 PM IST
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Cairn dispute: Govt sees no threat to privatisation of Air India

Once Air India is sold to private buyer, Cairn's claim will be defeated: Official

Updated On : 18 May 2021 | 6:10 AM IST
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No caste-based job reservation in PSBs after disinvestment: Report

This move, however, will not impact employees who have affirmative action benefits.

Updated On : 31 Mar 2021 | 1:11 PM IST
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Govt may pare 1-2% SUUTI stake in Axis Bank to meet disinvestment targets

Proposed move may fetch Centre Rs 2,300 crore

Updated On : 18 Feb 2021 | 6:10 AM IST
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Air India divestment expected to be closed in first qtr of FY22: DEA secy

We have taken up some big-bang disinvestments, particularly Air India and LIC on priority, said Bajaj

Updated On : 04 Feb 2021 | 6:10 AM IST
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A bold move

Policy on strategic disinvestment is a huge break from the past

Updated On : 03 Feb 2021 | 12:34 AM IST
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Budget 2021: It's business as usual

There are several welcome standalone reforms but these do not add up to a coherent strategy to achieve a $5 trillion economy

Updated On : 02 Feb 2021 | 2:22 AM IST
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Moody's raises doubts on higher revenue targets from tax, divestment

Moody's, while silent on the sovereign rating on the higher-than-expected fiscal deficit numbers, expressed doubts over attaining the higher revenue targets and divestment realisation

Updated On : 01 Feb 2021 | 4:38 PM IST
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Budget 2021 can be a turning point in India's socialist orientation

The government focuses on developing infrastructure, dares to gamble on deficit.

Updated On : 01 Feb 2021 | 3:56 PM IST
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Banking on Budget: The five areas of focus for FM Nirmala Sitharaman

Given the series of policy announcements made by Finance Minister Nirmala Sitharaman in the last 9 months it is reasonable not to expect more this time

Updated On : 20 Jan 2021 | 9:39 AM IST
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Revenue to disinvestment: Govt short of finances as it tries to fix economy

The govt's net revenue in the April-July period of 2020 contracted 42%, as its overall expenditure growth was kept at 11%. A K Bhattacharya explains the government's challenges in fixing the economy

Updated On : 10 Sep 2020 | 11:33 AM IST
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With no boss around, is BPCL going driverless on stake sale drive?

Two of the top executives in the board are set to superannuate from the services of the corporation on August 31

Updated On : 17 Aug 2020 | 9:35 PM IST
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Three Life Insurance Corp unions urge govt not to divest stake in insurer

According to them, LIC today is managing assets in excess of Rs 32 trillion

Updated On : 20 Jun 2020 | 4:59 PM IST
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Covid-19 impact: Missing disinvestment targets will have consequences

Any slippage in disinvestment numbers combined with other revenue shortfall would mean the govt would have to borrow more in the market

Updated On : 09 Apr 2020 | 8:58 AM IST
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Air India disinvestment process going 'extremely well': Hardeep Singh Puri

It has proposed selling 100% stake in Air India along with budget airline Air India Express and the national carrier's 50% stake in AISATS, an equal joint venture with Singapore Airlines.

Updated On : 06 Mar 2020 | 3:55 PM IST
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BPCL disinvestment: Next significant capex after new investor steps in

BPCL is in the process of buying land from Hindustan Organic Chemicals to set up the planned facilities

Updated On : 18 Feb 2020 | 11:08 PM IST
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Govt expected to soon issue EoIs for BPCL, Shipping Corp, Concor

Moreover, for FY20, officials said the revised divestment plans will not be derailed because of cancelled road shows in the Far East over fears of Coronavirus

Updated On : 14 Feb 2020 | 10:29 PM IST
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