Shifting gear

Falling disinvestment receipts from PSUs are as stark as the rapid rise in government capital support for the public sector

- A K BHATTACHARYA

The Narendra Modi government's engagement with public sector undertakings (PSU) has undergone a major change in the last 10 years. There are some obvious trends, and there are some that are not so obvious.

The rise and fall in receipts from disinvestment of government equity in central PSUs is one such obvious trend. It rose from 0.2 per cent of gross domestic product (GDP) in 2014-15 to a high of 0.6 per cent of GDP in 2017-18. But over the next few years, it fell steadily to just about 0.03 per cent of GDP in 2024-25.

Importantly, the fall in disinvestment receipt since 2017-18 was sharper than the rise in the previous three years.

Disinvestment as a policy was launched in the early 1990s to bolster revenue and use the reduced government stake in PSUs to help enhance their autonomy. The central idea behind disinvestment was that the government should not be in the business of running businesses. Disinvestment was seen as part of a process towards the eventual privatisation of PSUs.

Understandably, therefore, disinvestment became a politically sensitive idea. Barring a few years of the Atal Bihari Vajpayee government in the late 1990s and early noughties, when over a dozen PSUs were sold to the private sector, privatisation as an idea did not take off. Even disinvestment made only a slow and halting progress in the last three decades.

The formation of the Modi government in May 2014 gave rise to hopes of a faster implementation of a disinvestment plan leading to privatisation. There was a good beginning, with higher disinvestment in the early years of the Modi government's first term, but in retrospect, it has proved to be a false start.