Question

Why is the Government of India disinvesting its equity in the Central Public Sector Enterprises (CPSEs)?
1. The Government intends to use the revenue earned from disinvestment mainly to pay off external debt.
2. The Government no longer intends to retain management control of CPSEs.
Which of the statements given above is/are correct?

• A. 1 only
• B. 2 only
• C. Both 1 and 2
• D. Neither 1 nor 2

Hint:

Government disinvestment is usually a minority stake sale; control typically stays with the government.

Answer 1

The Correct Option is D

Disinvestment is often confused with privatisation, so this question is really checking whether the reader knows the real, limited purpose behind most CPSE disinvestment.

1. Statement 1: Government disinvestment revenue is used broadly for plan spending, social programmes and bridging the fiscal deficit, and it is not specifically directed at paying off external debt, so this claim overstates the purpose.
2. Statement 2: Most disinvestment is a minority stake sale, and the government usually keeps its majority holding and management control of the CPSE, so this statement is not accurate either.

Since neither reason matches how disinvestment is actually used and structured, both statements fail.

So the correct answer is option D, neither 1 nor 2.