Question

"The strategic sale of a public sector undertaking and the minority sale of its equity are both established instruments of disinvestment." Defend or refute, the given statement with valid arguments.

Hint:

Remember: Disinvestment helps reduce fiscal deficits and encourages private sector involvement, but it should be done in a manner that ensures long-term growth and public welfare.

Answer 1

Step 1: Understanding Disinvestment.
I defend the statement. Both methods are valid forms of "disinvestment," which refers to the dilution of the government's stake in Public Sector Undertakings (PSUs).
Step 2: Explaining Minority Sale.
A minority sale involves selling a small portion (e.g., 5-10%) of the company's shares to the public while the government still keeps more than 51% ownership. The primary goal here is to raise funds for the government budget (resource mobilization) without giving up control of the company.
Step 3: Explaining Strategic Sale.
A strategic sale involves selling a larger chunk of equity (often 50% or more) and, more importantly, transferring the **management control** to a private buyer. This is aimed at improving the efficiency and performance of the PSU by bringing in private-sector expertise and technology.
Step 4: Summary.
Since both methods involve the government selling its equity to the private sector, they are both correctly classified as instruments of the broader disinvestment policy.