Thursday, March 5, 2015

What is Disinvestment?





1 Disinvestment is when the government sells the equity shares it holds in public sector units (PSUs) to individuals or institutions.

2 Disinvestment transfers the ownership of shares from government to another entity, at market prices and creates gains for the government depending on the price.

3 It is done when the PSU is not profitable or the government does not want to continue in any business since the private sector has penetrated that business.

4 When funds raised from disinvestment are used to meet routine revenue expenditure, it is undesirable as an asset is sold without creating another asset.

5 Disinvestment has become a significant source of revenue for the government, `40,000 crore is the estimated amount to be raised in financial year 2014-15.


 
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