Manmohan Singh's Era of Divestment: These PSUs Embraced Change

The UPA government led by Manmohan Singh followed a calculated approach to disinvestment, steering away from strategic sales or full privatization.

Instead, the emphasis was on raising funds through minority stake sales while maintaining the public sector’s character. This approach was guided by the principle of leveraging CPSEs' profitability while ensuring their contributions to national welfare.

Focus on Retaining CPSE Autonomy
Dr Singh’s government implemented a case-by-case policy for disinvestment, emphasizing that profitable CPSEs would remain under public control. The revenue generated was channelled towards social sector schemes, such as rural employment and education, ensuring public welfare remained a priority.

Key Companies That Opted for Divestment During UPA Era
The government undertook disinvestment initiatives involving several Central Public Sector Enterprises (CPSEs). These companies were chosen based on their financial health, sectoral significance, and market potential.

Oil and Natural Gas Corporation (ONGC)
Public offers and minority sales were instrumental in ONGC’s divestment process. This became the first listed company to divest shared using this method. The government diluted 5% shareholdings and realised 12749.52 crore.

‘Post the ONGC transaction, there were several other OFS transactions through stock exchanges in firms like, Oil India Ltd, Rashtriya Chemicals & Fertilizers Ltd, NTPC Ltd, Hindustan Copper Ltd, MMTC, NALCO, National Fertilizers Ltd, ITDC Ltd and NMDC Ltd. In total, 13 CPSEs conducted OFSs and raised a total of INR 37,590 crore,’ according to the report by National Institute of Public Finance and Policy (NIPFP) Working Paper Series.

Indian Oil Corporation (IOC)
Shares were offered through stock exchanges to maintain transparency. To fund social welfare schemes while ensuring IOC’s autonomy. IOC remained under government control, with stakes being sold to mutual funds and retail investors.

Steel Authority of India Limited (SAIL)

The steel Ministry had proposed the merger of this firm with SAIL, but in 2019 the plan was rejected possibly due to adverse market conditions and the worsening financial health of SAIL . As a result, the government decided to go for strategic disinvestment of the firm instead.

Financial Outcomes and Missed Targets
Despite setting ambitious targets, the government achieved Rs 1,14,045 crore against the projected Rs 1,93,000 crore during this phase.

‘One of the goals of the government in this phase was to encourage CPSEs to access capital markets and to meet the increased minimum public shareholding requirement. As a result, there was a pivot towards minority stake sales. This resulted in two new methods of disinvestment: offer for sale through the stock exchange (OFS-SE) and exchange-traded funds (ETFs).

There was also an increase in the number of public offers in this period, as well as on the use of buybacks as a method of disinvestment. Overall, this phase saw no strategic sales. The target of INR 1,93,000 crore was not realised. Instead, the government raised INR 1,14,045 crore,’ as mentioned in the report.