Disinvestment is an economic concept and a government policy that involves the sale or liquidation of the government's ownership stake in a government-owned asset, primarily Public Sector Enterprises (PSEs) or Central Public Sector Enterprises (CPSEs). The policy was first introduced in 1991 as part of the economic liberalization and structural reforms to address the poor performance of PSEs and reduce the government's fiscal burden and budgetary deficit.
The process is managed by the Department of Investment and Public Asset Management (DIPAM), which was renamed from the Department of Disinvestment on April 14, 2016, and functions under the Ministry of Finance. Disinvestment is executed through various mechanisms, including Minority Disinvestment, where the government sells a stake but retains majority ownership (over 51%), often via methods like Offer For Sale (OFS) or Initial Public Offerings (IPOs). The other key mechanism is Strategic Disinvestment, which involves the sale of a substantial portion of the government's stake, along with the transfer of management control to a private entity.
The policy underwent a significant change with the notification of the New Public Sector Enterprise (PSE) Policy on February 4, 2021. This policy clearly categorizes sectors as 'strategic' or 'non-strategic,' mandating that the government will retain only a "bare minimum presence" in strategic sectors, while all PSEs in non-strategic sectors will be considered for privatization or closure. Furthermore, the government no longer sets a separate annual disinvestment target, instead including the proceeds under miscellaneous capital receipts from the Revised Estimate stage of FY24.