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12 Jan 2026·Source: The Hindu
3 min
EconomyNEWS

CII Urges Demand-Led Approach for Faster PSE Privatization

CII proposes a four-pronged strategy for faster PSE privatization.

CII Urges Demand-Led Approach for Faster PSE Privatization

Photo by Thiago Zanutigh

The Confederation of Indian Industry (CII) has suggested an accelerated four-pronged strategy to unlock value from the disinvestment of public sector enterprises (PSEs), calling for a demand-driven approach in selecting units for privatization, and following a predictable road map. In its proposals for the Union Budget 2026-27, the industry lobby urged the Union government to mobilise resources through a calibrated approach to privatisation focusing on sectors where private participation can enhance efficiency, technology infusion, and global competitiveness. The CII called upon the Centre to announce a rolling three-year privatisation pipeline, outlining which enterprises are likely to be taken up for privatisation during this period. Reducing the government’s stake to 51% in 78 listed PSEs could unlock close to ₹10 lakh crore, according to its analysis.

Key Facts

1.

CII: Suggests four-pronged strategy for PSE privatization

2.

Govt stake reduction to 51%: Could unlock ₹10 lakh crore

UPSC Exam Angles

1.

GS Paper III: Indian Economy - Mobilization of Resources

2.

Link to Fiscal Policy and Government Budgeting

3.

Potential for statement-based questions on disinvestment policies and their impact

Visual Insights

Potential Revenue from PSE Disinvestment

Key statistics related to the potential revenue generation from reducing government stake in listed PSEs, as suggested by CII.

Number of Listed PSEs
78

Reducing government stake in these PSEs is expected to unlock significant value.

Potential Revenue Unlocked
₹10 lakh crore

Estimated revenue that could be generated by reducing government stake to 51% in listed PSEs.

Government Stake Reduction Target
51%

CII suggests reducing government stake to this level to improve efficiency and attract private investment.

More Information

Background

The policy of disinvestment in India has evolved significantly since its formal inception in 1991, following the economic liberalization. Prior to this, public sector enterprises (PSEs) were seen as crucial for nation-building and achieving social justice. The initial phase of disinvestment focused on minority stake sales in profitable PSEs.

The Rangarajan Committee in 1993 provided a structured framework, advocating for strategic sales and private sector participation. Subsequent governments adopted various approaches, including strategic sales, initial public offerings (IPOs), and the creation of a dedicated Department of Disinvestment (later renamed Department of Investment and Public Asset Management - DIPAM). The objectives have shifted over time from primarily fiscal deficit management to improving efficiency, corporate governance, and unlocking the value of public assets.

The debate around the role of the state versus the private sector in key industries has been central to this evolution.

Latest Developments

In recent years, the government has intensified its focus on strategic disinvestment, aiming for complete privatization of select PSEs. The creation of the National Monetisation Pipeline (NMP) and the Asset Monetisation strategy reflects this push. Challenges persist, including valuation difficulties, labor issues, and political opposition.

The COVID-19 pandemic further complicated the process, impacting market sentiment and delaying planned disinvestments. Looking ahead, the success of the privatization program hinges on addressing these challenges, ensuring transparency, and building investor confidence. The government is also exploring innovative approaches, such as the use of special purpose vehicles (SPVs) and infrastructure investment trusts (InvITs), to unlock value from public assets.

The long-term impact on employment, competition, and economic growth remains a key area of focus.

Practice Questions (MCQs)

1. Consider the following statements regarding the evolution of disinvestment policy in India: 1. The Rangarajan Committee (1993) advocated for strategic sales and private sector participation in PSEs. 2. The primary objective of disinvestment since 1991 has consistently been to reduce the fiscal deficit. 3. The Department of Disinvestment was later renamed as the Department of Public Enterprises (DPE). Which of the statements given above is/are correct?

  • A.1 only
  • B.2 only
  • C.1 and 3 only
  • D.1, 2 and 3
Show Answer

Answer: A

Statement 1 is correct as the Rangarajan Committee did advocate for strategic sales. Statement 2 is incorrect as the objectives have evolved beyond just fiscal deficit management. Statement 3 is incorrect as the department was renamed Department of Investment and Public Asset Management (DIPAM).

2. In the context of Public Sector Enterprises (PSEs) in India, which of the following statements is NOT correct?

  • A.The National Monetisation Pipeline (NMP) aims to unlock value from public assets.
  • B.Strategic disinvestment typically involves the transfer of management control to the private sector.
  • C.All PSEs are automatically eligible for disinvestment.
  • D.DIPAM is the nodal department responsible for managing disinvestment.
Show Answer

Answer: C

Not all PSEs are automatically eligible for disinvestment; the government makes a strategic decision based on various factors. The other statements are correct.

3. Which of the following committees is/are associated with reforms related to Public Sector Undertakings (PSUs) and disinvestment in India? 1. Arjun Sengupta Committee 2. C. Rangarajan Committee 3. Vijay Kelkar Committee Select the correct answer using the code given below:

  • A.1 and 2 only
  • B.2 and 3 only
  • C.1 and 3 only
  • D.1, 2 and 3
Show Answer

Answer: D

All three committees have contributed to reforms related to PSUs and disinvestment. The Arjun Sengupta Committee focused on the autonomy and efficiency of PSUs, the Rangarajan Committee on disinvestment strategies, and the Vijay Kelkar Committee on fiscal consolidation and PSU reforms.

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