D Isinvest Ment in Pub Lic Sector E N Terprises': National Institute of Financial Management

‘Disinvestment in Public Sector Enterprises’
Cd r S an g ra m D e y
ABSTRACT
The founding fathers of our republic used the public

enterprises as an essential and vibrant element in the building -
up of India‟s economy. One of the basic objectives of starting
the public enterprises in India was to build infrastructure for
economic development and rapid economic growth. Since their
inception, public enterprises have played an important role in
achieving the objective of economic growth with social justice.
However, economic compulsions, viz., deterioration of balance
of payment position and increasing fiscal deficit led to adoption
of a new approach towards the public enterprises in 1991.
Disinvestment of public enterprises is one of the policy
measures adopted by the government of India for providing
financial discipline and improve the performance of this
enterprises in tune with the new economic policy of
Liberalisation, Privatisation and Globalisation (LPG) through the
1991 Industrial Policy Statement.
During the year 1997 -98, a major initiative has been

taken to grant su bstantial autonomy full powers to incur capital
expenditure, to nine selected public sector enterprises, called
„Navaratnas‟ with the view to assisting them in becoming global
giants. Later, two more enterprises were added to this list.
Enhanced financial, managerial and operational autonomy was
also granted to other profit -making enterprises called „Mini -
Ratnas‟ numbering approximately 97. A Public Sector
Disinvestment Commission has been constituted in 1996. The
terms of reference of the Commission incl ude inter -alia drawing
up comprehensive overall long -term disinvestment program for
the public enterprises, determining the extent of
disinvestment, preferred mode of disinvestment etc.
An overview of the objectives of the New Economic Policy

clearly manifests that the disinvestment in public enterprises
are a definite intervention measures to help achieve the
broader macro objectives of Indian economy.
1
National Institute of Financial Management
ABBREVIATIONS USED
AYL Andrew Yule & Company Limited

BALCO Bharat Aluminium Company Limited
BBUNL Bharat Bhari Udyog Nigam Limited
BEML Bharat Earth Movers limited
BEL Bharat Electronics Limited
BHEL Bharat Heavy Electricals Limited
BPCL Bharat Petroleum Corporation Limited
BRPL Bongaingaon Refinery & Petrochemicals Limited
CPCL Chennai Petroleu m Corporation Limited
CMC CMC Limited
CONCOR Container Corporation of India Limited
DCI/DCIL Dredging Corporation of India
EIL Engineers India Limited
FACT Fertilizers & Chemicals Travancore Limited
GAIL GAIL (India) Limited
GIC General Insurance Co rporation of India
HFCL Himachal Futuristic Communications Limited
HLL Hindustan Lever Limited
HOCL Hindustan Organic Chemicals Limted
HPCL Hindustan Petroleum Corporation Limited
HPF Hindustan Photo Films Manufacturing Corp n Limited
HTL Hindustan Teleprinters Limited
HZL Hindustan Zinc Limited
HCI Hotel Corporation of India Limited
IBP IBP Company Limited
ICI ICI Limited
ICICI ICICI Limited
ITDC India Tourism & Development Corporation Limited
IOC Indian Oil Corporation Limited
2
IPCL Indian Petro Chemicals Corporation Limited

IDBI Industrial Development Bank of India Limited
JCL Jessop & Company Limited
KRL Kochi Refineries Limited
KIOCL Kudremukh Iron Ore Company Limited
LJMC Lagan Jute Machinery Company Limited
LVPH Laxmi Vilas Palace H otel
LIC Life Insurance Corporation of India Limited
MTNL Mahanagar Telephone Nigam Limited
MUL Maruti Udyog Limited
MMTC Mineral and Metals Trading Corporation of India Ltd
MFIL Modern Food Industries (India) Limited
NALCO National Aluminium Company Limited
NFL National Fertilizers Limited
NMDC National Mineral Development Corporation Limited
NTC National Textile Corporation Limited
NTPC National Thermal Power Corporation Limited
NLC Neyveli Lignite Corporation Ltd
ONGC Oil & Natural Gas Corpor ation Ltd
PPL Paradeep Phosphates Limited
RCF Rashtriya Chemicals & Fertilizers Limited
RITES RITES Limited
SCI Shipping Corporation of India Limited
SBI State Bank of India
STC State Trading Corporation of India Limited
SAIL Steel Authority of Indi a Limited
SIIL Sterlite Industries (India) Limited
SMC Suzuki Motor Corporation
UTI Unit Trust of India Ltd
VSNL Videsh Sanchar Nigam Limited
ZMPPL Zuari Maroc Phosphates Private Limited
3
INTRODUCTION
Overview of the Public Sector
1.1 Public sector enterprises are companies

established by the central government under
the Companies Act or as statutory
corporations under specific statues of
parliament. Public Enterprises were established in the early
1950s for rapid industrial and economic growth, to create
necessary infrastructure, for employment generations, to
promote balanced regional development and to assist the
growth of other industries.
1.2 There were five Public Enterprises owned by the Central

Government at the beginning of the First Five Year Plan with a
total investment of Rs.29 crore. By the end of the Seventh Plan
in 1990, the number of Public Enterprises had increased to 244
with a total investment of Rs.99,329 crore. Thereafter, though
the capital invested increased to Rs.3,93,057 cr ore in 2005-06,
the number of Public Enterprises declined to 239. In 2006-07,
there were 247 Central Public Sector Enterprises in India, as
compared to 236 in 1997 -98.
1.3 The public sector presence is predominant in public

utilities and infrastructure. R ailways, post & telegraph, ports,
airports and power are dominated by Public Enterprises or
department-owned enterprises. In the roads sector, while some
roads are owned and maintained by the private sector, publicly
owned and maintained roads dominate. Ro ad freight capacity is
almost entirely private, while road passenger traffic capacity is
also significantly privately owned and managed. In telecom, the
public sector continues to be dominant in the provision of fixed
line telephone services, while private licencees are operating in
some urban areas. Mobile services are predominantly private,
particularly in urban areas, while inter -state and international
linking services are significantly privately managed and owned.
1.4 In the tradable goods sector, the public sector is dominant

in coal; oil and gas exploration, development, extraction and
4
transportation, though nearly one third of oil refining capacity

is now owned by the private sector. The public sector is also a
significant player in steel, fertilize r, aluminum and copper. In
the engineering industry, the public sector has been losing
market share except in electrical machinery, where BHEL is a
significant player. In construction and project services, the
public sector is a minor player. The bulk of t he remaining
tradable sector is privately owned and managed.
Performance Status
1.5 The macro view of overall performance of these numbers

of CPSEs in the last 10 years is tabulated below:-
Growth of Investment in CPSEs
Total Investment No of
Particulars
(Rs in crore) CPSEs
On the eve of the 1st Five Year Plan (1.4.1951) 29 5
On the eve of the 2nd Five Year Plan (1.4.1956) 81 21

On the eve of the 3rd Five Year Plan (1.4.1961) 948 47
At the end of 3rd Five Year Plan (31.3.1966) 2410 73
On the eve of the 4th Five Year Plan (1.4.1969) 3897 84

At the end of 5th Five Year Plan (31.3.1979) 15534 169

As on 31.3.2003 335647 240
As on 31.3.2004 349994 242
As on 31.3.2005 357939 237
As on 31.3.2006 403705 239
As on 31.3.2007 421089 247
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1.6 The following observations are made regarding the

performance of CPSEs during the last 10 years: -
(a) The capital employed has increased from Rs.

2,49,855 Crores in 1997 -98 to Rs.6,65,124 Crores in
2006-07 recording a growth of 266%.
(b) Number of loss incurring CPSEs, it has come down

from 100 in 1997 -98 to 59 in 2006-07.
(c) Turnover increased to Rs.9,64,410 Crores in 2006-

07, from Rs. 2,76,002 Crores in 1997-98 recording a net
worth growth of 349% increased from Rs. 1,34,443 Crores
to Rs.4,52,995 Crores in 2006 -07 recording a growth of
337%.
(d) The turnover is equal to Rs.9,64,410 Crores in 2006 -

07, which is an increase of 349% in comparison to 1997 -
98 (Rs. 2,76,002 Crores ). As regards Net worth, it has
increased by 337% in 2006 -07 in comparison to 1997 -98
(Rs. 1,34,443 Crores), and is presently at Rs.4,52,995
Crores.
(e) Net profit has increased by 599% in 2006 -07 in

comparison to 1997 -98 (Rs. 13582 Crores), and is
currently to the tune of Rs. 81550 Crores.
Objectives of Disinvestment
1.7 Disinvestment is a process in which the public undertaking

reduces its portion in equity by disposing its shareholding.
“Disinvestment” as per SEBI (substantial acquisition of shares)
guideline, means the sale by the central government/state
government, of its shares or voting rights and/or control, in
PSUs. The government retains partial control with it and
disposing its holdi ng to some extent. The disinvestment
reduces government participation in the company. The
government has been disinvesting its equity holding in PSUs
largely since 1991 with the following major objectives.
6
(a) Revenue Collection. The government is making a

way out of necessity to raise revenues for bringing down
the fiscal deficit as commitment made to the IMF.
(b) Improvement in Efficiency . This is being

undertaken to ensure greater accountability and improved
efficiency. These financial institutions and mutual funds
are expected to off load them into the secondary market.
This will enable to the investor to demand more
accountability and efficiency from the management of
PSUs.
(c) Market Discipline . Disinvestment is resorted to

meet budgetary targets an d to bring the PSUs to meet the
market discipline, competitiveness and to emphasize on
profit-ability and maximization of stakeholders wealth.
(d) Mobilization. With the help of disinvestment

pogramme, government would be in a position to generate
sufficient resources. Out of such funds, government can
make available some funds as loan to PSUs.
(e) Direct Public Participation. Such disinvestments

would enable the public, to participate in the equity of
PSUs.
(f) Encourage Employee Ownership . This would

encourage the employees to buy shares 0f PSUs. This may
motive them to work harder and improve the work culture.
(g) Reduction of Bureaucratic Control . This may

provide more autonomy to the management of PSUs.
7
EVOLUTION OF
DISINVESTMENT POLICY
Background
2.1 The Statement of Industrial Policy of

July 24, 1991 stated that in order to raise
resources and encourage wider public
participation, a part of the government‟s shareholding in the
public sector would be offered to mutual funds, financial
institutions, general public and workers. Thus, disinvestment of
the Government‟s equity in Public Enterprises started in 1991 -
92, when minority shareholding of the Central Government in
30 individual Public Enterprises was sold to selected financial
institutio ns (LIC, GIC, UTI) in bundles. The shares were sold in
bundles to ensure that along with the attractive shares, the not
so attractive shares also got sold. Subsequently, shares of
individual Public Enterprises were sold and the category of
eligible buyers was gradually expanded to include individuals,
NRIs and registered FIIs. After 1996, sale through the GDR
route was also initiated and MTNL (1997 -98), VSNL (1996-97
and 1998 -99) and GAIL (1999 -2000) all used the opportunity to
access the GDR market.
2.2 The policy on disinvestment has evolved largely through

statements of Finance Ministers in their budget speeches. In
the interim budget 1991 -92, it was announced that the
Government would disinvest up to 20 per cent of its equity in
selected public sector undertakings in favour of mutual funds
and financial or investment institutions in the public sector to
broad-base the shareholding, improve management, enhance
availability of resources for these Public Enterprises and yield
resources for the exchequer.
2.3 The Rangarajan Committee recommended in April, 1993,

that the percentage of equity to be disinvested should be
generally under 49 per cent in industries reserved for the
public sector and over 74 per cent in other industries. As per
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Statement of Industrial Policy of 24th July, 1991 the following

industries were proposed to be reserved for the public sector: -
(a) Arms and ammunition and allied items of defence

equipment, defence aircraft and warships.
(b) Atomic Energy.
(c) Coal and lignite.
(d) Mineral oils.
(e) Mining of iron ore, manganese ore, chrome ore,

gypsum, sulphur, gold and diamond.
(f) Mining of copper, lead, zinc, tin, molybdenum and

wolfram.
(g) Minerals specified in the Schedule to the Atomic

Energy (Control of Production and Use) O rder, 1953.
(h) Railway transport.
2.4 In the budget speech of 1996 -97, the proposal to establish

a Disinvestment Commission was announced. It was also stated
that the revenues generated from such disinvestment will be
utilised for allocations to educati on and health and for creating
a fund to strengthen Public Enterprises.
Public Sector Disinvestment Commission
2.5 The Public Sector Disinvestment Commission was

established on 23rd August, 1996, for a period of three years,
as an independent, non -statutory, advisory body with Shri G.V.
Ramakrishna as full time Chairman, four other part time
Members and a full time Member Secretary. 72 Public
Enterprises were referred to the Commission. Subsequently,
eight cases were withdrawn. The Commission did not tak e up
examination of the cases of six Public Enterprises, which were
registered with the Board for Industrial and Financial
Reconstruction (BIFR). The Commission submitted 12 reports
9
covering 58 Public Enterprises , recommending strategic sale in

25 cases and disinvestment through modes other than strategic
sale in 33 cases. The tenure of the Chairman of the Commission
was extended till 30th November, 1999 .
2.6 In the budget speech of 1998 –99, it was announced that,

in the generality of cases, the Government ‟s shareholding in
Public Enterprises would be brought down to 26 per cent. In the
case of Public Enterprises involving strategic considerations,
the Government would continue to retain majority
shareholding. The interest of workers would be protected in a ll
cases.
2.7 In the budget speech of 1999 -2000, it was announced that

Government's strategy towards the Public Enterprises would
continue to encompass a judicious mix of strengthening
strategic units, privatising non -strategic ones through gradual
disinvestment or strategic sale and devising viable
rehabilitation strategies for weak units.
2.8 Strategic Public Enterprises. On 16th March, 1999, the

Government classified the Public Enterprises into strategic and
non-strategic areas for the purpose of disinvestment. It was
decided that the strategic Public Enterprises would be those
functioning in the areas of:
(a) Arms and ammunition and the allied items of defence

equipment, defence aircrafts and warships;
(b) Atomic energy (except in the areas related to the

generation of nuclear power and applications of radiation
and radio-isotopes to agriculture, medicine and non -
strategic industries);
(c) Railway transport.
2.9 Non-strategic Public Enterprises. All other Public

Enterprises were to be considered a s being non-strategic. For
the non-strategic Public Enterprises, it was decided that
reduction of the Government‟s shareholding to 26 per cent
would not be automatic and the manner and pace of doing so
10
would be decided on a case -by-case basis on the follow ing

considerations:
(a) Whether the industrial sector required the presence of

the public sector as a countervailing force to prevent
concentration of power in private hands; and
(b) Whether the industrial sector required a proper

regulatory mechanism to protect the consumer interests
before Public Sector Enterprises were privatised.
2.10 Department for Disinvestment. It was also decided to

establish a new Department for Disinvestment which came into
being on 10th December, 1999. The following business w as
allocated to it: -
(a) All matters relating to disinvestment of Central

Government equity from Central Public Sector
Undertakings.
(b) Decisions on the recommendations of the

Disinvestment Commission on the modalities of
disinvestment, including restr ucturing.
(c) Implementation of disinvestment decisions, including

appointment of advisers, pricing of shares, and other
terms and conditions of disinvestment.
(d) Disinvestment Commission.
(e) Central Public Sector Undertakings for purposes of

disinvestment of Government equity only.
2.11 In the budget speech of 2000 -2001, it was announced that

the main elements of the Government‟s policy were to
restructure and revive potentially viable Public Enterprises ;
close down Public Enterprises which cannot be revived; bring
down Government‟s shareholding in all non -strategic Public
Enterprises to 26 per cent or lower, if necessary; and fully
protect the interests of workers. The receipts from
disinvestment and privatisation will be used for meeting
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expenditure on social sectors, restructuring of Public

Enterprises and for retiring public debt.
Re-constitution of Disinvestment Commission
2.12 The Public Sector Disinvestment Commission was re -

constituted on 24th July, 2001 for a period of two years with
Dr. R.H. Patil as Chairman (part time) along with four other
Members (part time) and a full time Member Secretary. The
then Ministry of Disinvestment had informed the Commission on
23rd January, 2002 that all non -strategic Public Enterprises ,
including subsidiaries, excluding IOC, ONGC and GAIL, stood
referred to the Commission for it to prioritize, examine and
make recommendations in the light of the Government policies
articulated earlier on 16th March, 1999 and the budget
speeches of Finance Ministers from time to time. The re -
constituted Disinvestment Commission in 13 reports examined
41 Public Enterprises recommending strategic sale in 34 cases
and disinvestment through other modes in seven cases. The
term of the Commission was subsequently extended till 31st
October, 2004. The Commission ceased to exist from 1st
November, 2004.
2.13 In the budget speech of 2001 –2002, it was announced

that Public Enterprises must be strengthened to compete and
prosper in the new environment.
2.14 The Government decided in Sep tember, 2002 that Public

Enterprises and Central Government owned cooperative
societies, where Government‟s ownership is 51 per cent or
more should not be permitted to participate, as bidders, in the
disinvestment of other Public Enterprises, unless specifically
approved by the Core Group of Secretaries on Disinvestment
(CGD). In December, 2002, on the basis of a proposal of the
Department of Fertilizers, it was decided that Multi -State
Cooperative Societies under the Department of Fertilizers be
allowed to participate in the disinvestment of fertilizer Public
Enterprises including NFL.
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2.15 In a statement made in both Houses of Parliament on 9th

December, 2002, by the then Minister of Disinvestment, the
Government reiterated the policy in the following ter ms:-
“The main objective of disinvestment is to put national

resources and assets to optimal use and in particular to
unleash the productive potential inherent in our public
sector enterprises. The policy of disinvestment specifically
aims at:
 Modernization and up gradation of Public Sector

Enterprises;
 Creation of new assets;
 Generation of employment; and
 Retiring of public debt.
Government would continue to ensure that disinvestment

does not result in alienation of national assets, which,
through the process of disinvestment, remain where they
are. It will also ensure that disinvestment does not result
in private monopolies. In order to provide complete
visibility to the Government‟s continued commitment of
utilisation of disinvestment proceeds for social and
infrastructure sectors, the Government would set up a
Disinvestment Proceeds Fund. This Fund will be used for
financing fresh employment opportunities and investment,
and for retirement of public debt. For the disinvestment of
natural asset companies, the Ministry of Finance and the
Ministry of Disinvestment will work out guidelines. The
Ministry of Finance will also prepare for consideration of
the Cabinet Committee on Disinvestment a paper on the
feasibility and modalities of setting up an Asset
Management Company to hold, manage and dispose the
residual holding of the Government in the companies in
which Government‟s equity has been disinvested to a
strategic partner.”
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DISINVESTMENT
PROCEDURES
3.1 From 1991-92, when it started and till

1996-97, disinvestment was handled by the
Department of Public Enterprises (Ministry of
Heavy Industries) and subsequently, from
1st April, 1997 till 9th December, 1999, by
the Department of Economic Affairs (Ministry of Finance). The
Department of Disinvest ment (DoD) was set up as a separate
department on 10th December, 1999 and was subsequently
renamed as Ministry of Disinvestment (MODI) from 6th
September, 2001. From 27th May, 2004, the Department of
Disinvestment is one of the Departments under the Minist ry of
Finance.
3.2 The procedures followed for disinvestment have evolved

over a period of time. These were based on decision -making
through inter - ministerial consultations and involvement of
professionals and experts, in view of the technical and comple x
nature of transactions and the need for transparency and fair
play. The decision making process, the bidding procedure and
the methods used for valuation of equity of CPSE sold are
described below for the different modes of sales.
Decision Making Process
3.3 Strategic Sale . The decision making process consisted of

the following steps: -
(a) Identification of the CPSE whose shares were to be

sold, the percentage of shares to be sold and the mode of
sale.
(b) Appointment of various advisers who would ass ist in

the process of sale.
(c) Selection of the bidders.
14
(d) Determination of the reserve price; and
(e) Approval of the price and other terms at which the

shares were to be sold.
3.4 Generally, though not universally, the starting point till

May, 2004 was study of the target CPSE by the Disinvestment
Commission. In June, 1997, the Government decided that the
recommendations of the Disinvestment Commission would be
processed by the Department of Economic Affairs (Ministry of
Finance) through a Core Gro up of Secretaries on Disinvestment
(CGD), chaired by the Cabinet Secretary, for obtaining the
decision of the Cabinet thereon. At that time, it was also
decided that for disinvestment transactions exceeding Rs.500
crore, CGD would directly supervise the im plementation of the
Cabinet decision through an inter - ministerial operational
group. This group consisted of Joint Secretaries from Ministry
of Finance, Department of Public Enterprises, the
administrative ministry concerned and the CMD of the CPSE
concerned. In all the cases, where CGD was to directly
supervise the disinvestment, CGD would recommend the timing,
pricing and extent of disinvestment etc., based upon the advice
of the inter- ministerial operational group, to the Finance
Minister, Industry Min ister and the Minister of the
administrative ministry for approval. For disinvestment
transactions below Rs.500 crore, the administrative ministry
concerned would be responsible for implementing Cabinet
decisions, though they were to bemonitored by CGD. Th e
administrative ministries concerned would be provided
appropriate technical assistance by the Department of Public
Enterprises and Ministry of Finance.
3.5 This system was further modified in 1999 when the

Department of Disinvestment (converted into Min istry of
Disinvestment on 6th September, 2001) was established and
issues, such as, which company was to be sold, the percentage
of shares and the mode of sale were decided, on a case -by-
case basis, by the Cabinet or one of its committees duly
authorized in this regard. Generally, DOD/MODI would initiate a
proposal for consideration of CGD which would further recomme
nd the case to the Cabinet Committee on Disinvestment. Thus,
15
there was a three -tier structure for decision - making and

implementation of decis ions:-
(a) Cabinet Committee on Disinvestment (CCD) at the

apex level;
(b) Core Group of Secretaries on Disinvestment (CGD) as

a recommendatory body; and
(c) Inter-Ministerial Group (IMG) as a consultative

group.
3.6 CCD was chaired by the Prime Minist er. The functions of
CCD, constituted in January, 2000 were as follows:
(a) To consider the advice of the Core Group of

Secretaries regarding policy issues relating to the
disinvestment programme;
(b) To decide the price band for the sale of Government‟s

shares through international/domestic capital market
route prior to the book building exe rcise, and to decide
the final price of sale in all cases;
(c) To decide the final pricing of the transaction and the

strategic partner in case of strategic sales;
(d) To decide on cases where there is disagreement

between the recommendations of the Disinvestment
Commission and the views of DOD/MODI; and
(e) To approve the three -year rolling plan and the annual
programme of disinvestment every year.
3.7 CGD was headed by the Cabinet Secretary. CGD

functioned as the Empowered Group for vetting the
recommendations of the Disinvestment Commission, monitored
the progress of implementation of CCD decisions, in
disinvestment transactions exceeding Rs.500 crore directly
supervised the process of disinvestment and made
recommendations to CCD on disinvestment policy matters.
16
3.8 A separate IMG was formed for each case of

disinvestment. Generally, it was chaired by Secretary,
DOD/MODI and comprised the officers of Ministry of Finance,
Department of Public Enterprises, Department of Legal Affairs,
Department of Company Affairs, the Administrative Ministry,
the CMD and the Director (Finance) of the CPSE concerned. IMG
was the forum where inter - ministerial consultation took plac e
at the primary level. Recommendations of the IMG were
considered by the CGD.
Appointment of Advisers
3.9 In September, 1997, Government decided that merchant

bankers/ global advisers would be appointed through a global
process of competitive selection. The Expressions of Interest
submitted by the advisers/merchant bankers were first
considered by IMG comprising representatives from the
Administrative Ministry concerned, the Department of Public
Enterprises, the Department of Economic Affairs and the Chi ef
Executive of the CPSE concerned. The recommendations of IMG
were considered by CGD and approved by the Minister in -
charge of the Administrative Ministry concerned, the Minister
ofIndustry and the Finance Minister. The criteria and marking
system for selection of Adviser for strategic sale were laid
down by the CGD in its meeting held on 1s t April, 1999. In
July, 1999, the Government modified the procedure to the
extent that intermediary advisers like Legal Advisers,
Accounting Advisers, Asset Valuers, E nvironmental Advisers
etc. should in future be appointed by the CPSE concerned
following its internal procedure which would also bear the
related expenditure. On 23rd June, 2000, the Government
further modified the procedure and decided that Global
Advisers would be termed as Advisers and be appointed with
the approval of Minister of State of the Department of
Disinvestment instead of the Group of Ministers.
3.10 In February, 2001 the Ministry of Law advised that all

advisers including the intermediary ad visers should be
appointed by the Government and not by the CPSE concerned.
Subsequently, the Government decided in July, 2001 that,
appointment of intermediary advisers would be made by
17
Department of Disinvestment, after making selection from the

list provided by the General Advisers. The actual appointment
of intermediary advisers was typically made on the
recommendations of an Inter -Ministerial Selection Committee
and with the approval of the Minister in -charge of Department
of Disinvestment. The criteri a and the marking system were
further revised with the approval of CGD in January, 2002.
Selection of Bidders
3.11 The procedure generally followed for selection of bidders

was that IMG constituted for the specific disinvestment
transaction determined th e qualification requirements based on
the recommendations of the Adviser. Thereafter, Expressions of
Interest (EoI) were invited through public advertisements in
leading business newspapers and also simultaneously placing
the advertisement as well as the P reliminary Information
Memorandum containing the requisite details including
qualification requirements, the format of submission of EoI, the
last date of submission etc. on the websites of DoD, the
administrative ministry and CPSE concerned. The IMG
concerned decided, on the basis of the recommendations of the
Advisers, on the eligibility of the bidders to participate further
in the process.
Determination of Reserve Price
3.12 Valuation was carried out to determine the Reserve Price.

The Evaluation Commi ttee (EC), generally consisting of the
Financial Adviser of the Ministry/Department administratively
concerned with the CPSE, a representative each from the
Administrative Ministry/Department concerned, the Department
of Economic Affairs, the Department of Disinvestment, the
Department of Public Enterprises, the Chief Executive and
Director (Finance), wherever available, of the CPSE concerned,
made recommendations regarding fixation of the Reserve Price.
The recommendations of EC were then considered by the IMG
which also included the Chief Executive and Director (Finance)
and a representative each of the Administrative Ministry and
the Department of Public Enterprises. The Adviser concerned
submitted the valuation report and the asset valuation report
18
to the EC and made presentations on the values arrived at by

different methodologies and merits and demerits of the various
methods. The Valuation Report of the Advisers contained
details of assumptions and basis of their recommendations. The
CGD considered and forwarded the recommendations of IMG to
CCD, which approved the valuation. However, MFIL was an
exception, where the bid submitted by Hindustan Lever Limited
was evaluated and recommended to CCD, for acceptance
directly by EC without fixing the reserve pr ice.
Offer for Sale
3.13 During February-March, 2004, Government sold its entire

residual equity in IBP, CMC and the residual equity of 28.945
per cent in the case of IPCL. Government also sold small
portions of equity in DCI, GAIL and ONGC. To assist th e
Government in selling its equity, Book Running Lead Managers
(BRLMs) were appointed, the BRLMs were selected through a
competitive bidding procedure and appointed after obtaining
the approval of the Minister -in-charge of the Department on the
basis of the recommendations of CGD and IMG. The proposals
for fixation of floor price/price band and the offer price were
first considered by a High -level Committee comprising
Secretary, Ministry of Disinvestment, Secretary of the
Administrative Ministry concerned, Joint Secretary, Department
of Economic Affairs and Joint Secretary, Department of
Disinvestment. Therecommendations of the High -level
Committee were submitted for approval to the Group of
Ministers constituted for this purpose.
3.14 Subsequently in June, 2004, the following disinvestment

related functions were allocated to the Cabinet Committee on
Economic Affairs (CCEA).
(a) to consider issues relating to disinvestment;
(b) to decide price band for the sale of Government shares

through Global Depositor y Receipt/domestic capital market
route prior to the book building exercise, and to decide
the final price of sale in all cases;
19
(c) to decide the final pricing of the transaction and the

strategic partner in case of the strategic sales;
(d) to decide on cases where there is disagreement

between the recommendations of the Disinvestment
Commission and the views of the Department of
Disinvestment.
3.15 During July, 2004, Government decided to piggyback with

an offer for sale on the fresh issue of equity th at was being
undertaken by NTPC. At the time of seeking Government‟s
approval, it was considered that the procedure to be followed
by NTPC for determining and approving the floor price/price
band and offer price and sale price would also be applicable to
the Government shares and this activity would be performed
simultaneously taking the entire offer as one. DOD would
participate in all monitoring level meetings in the Ministry of
Power. A separate IMG was not to be formed.
3.16 In September, 2004, Governm ent constituted an

Empowered Group of Ministers (EGoM) to decide all issues
related to the price band for the sale of Government‟s shares
through GDR/domestic capital market route prior to the book
building exercise and to decide the final price of sale in all such
cases. EGoM comprises the Minister of Finance, the Minister of
the Administrative Ministry concerned and Deputy Chairman,
Planning Commission. EGoM would be serviced by Department
of Disinvestment.
Sale of Residual Equity by the Auction Method
3.17 The Government‟s residual equity of 18.28 per cent in MUL

was sold in two tranches of 8 per cent and 10.27 per cent in
January, 2006 and May, 2007 respectively. Another 0.01 per
cent was sold to employees in March, 2006.
3.18 In the case of sale of 8 per cent Government equity in

MUL to public sector financial institutions and public sector
banks, an IMG finalized its recommendation on appointment of
Advisers after going through the presentations made by
merchant bankers/investment bankers. The recomm endations
20
of IMG were later considered by CGD and approved by the

Finance Minister. The same advisers were retained for the sale
of Government‟s remaining stake of 10.27 per cent to public
sector financial institutions, public sector banks and Indian
mutual funds.
3.19 An Evaluation Committee under the Chairmanship of

JS&FA, DoD with JS, DHI; JS, DoD; and JS (PSE), Department
of Economic Affairs, as members, was constituted for
recommending the floor price, final sale pric e and allocation of
shares. The Committee‟s recommendations were submitted to
EGoM for approval.
Bidding Procedure
3.20 Strategic Sale . The bidding procedure for strategic

sale was evolved keeping in view the principles of
transparency, administrative simplicity and fair play. Bidding
was done in a two -stage process. In the first stage, all those
bidders meeting the eligibility criteria were shortlisted by an
IMG and were invited to do the due diligence of the company.
Simultaneously, the transaction documents were firmed up by
the Advisers in consultation with the CPSE concerned, the
shortlisted interested parties and IMG. Once the Government
approved the draft transaction documents, which defined the
future rights and obligations of the Government and the
strategic partner, the conditio ns for sale of shares etc.,
financial bids were invited from the shortlisted bidders who had
completed due diligence. After determination of the Reserve
Price, the financial bids were opened and the highest eligible
bidder was recommended by EC/IMG to CGD. The
recommendations of IMG together with the recommendations of
CGD in regard to sale price and the buyer were placed before
CCD for approval.
3.21 Offers for Sale . Since 2003, eight Offers for Sale have
been concluded. All of them utilized the Book Buil ding route.
Under this methodology, bids were invited within a pre -
determined floor price/price band from the investors during a
specific period. Each investor submitted bid specifying the
number of shares bid for and the price. After the end of the
21
bidding period, the bids were consolidated and a cut off price
was recommended by the Inter -Ministerial Committee,
constituted separately for each transaction, for approval to the
EGoM, which took the final decision regarding allocation of
shares to investors an d the cut-off price.
3.22 Auction Method . In the initial phase (December, 1991

to 1995-96), disinvestment of shares of select Public
Enterprises was through the auction method. The reserve price
was first determined by the Core Group of Secretaries and th en
the bids were invited from pre -determined target group of
investors. Shares were allotted to the bidders in order of the
bid prices, first to the highest
bidder and then to next and so on until the shares were
exhausted or the reserve price reached, whi chever was earlier.
3.23 For the sale of residual shareholding of Government in

MUL undertaken in January, 2006 and May, 2007, the
Government first fixed the reserve price and then the bids were
invited from the target group of investors. The shares were
sold through the auction method described above.
Valuation
3.24 As mentioned earlier, valuation was carried out to

determine the Reserve Price. The objective of valuation is to
determine the fair value of an asset, which in turn is based on
the assessmen t of its intrinsic value accruing from the
fundamentals of the asset on a stand -alone basis. A purchase
and sale is concluded only when two parties, with varying views
on the value of an asset, reach an agreement on the same
price. Thus the sale price is d ifferent from the Reserve Price,
the latter being a benchmark for evaluation of bids received
through the bidding process.
3.25 Disinvestment Commission's Recommendations on

Valuation. The Disinvestment Commission, in its Report on
Disinvestment: Strategy and Issues, submitted in December,
1996, while underlining the importance of the subject of
valuation, discussed three basic approaches to valuation:
22
(a) Discounted Cash flow (DCF).
(b) Relative valuation.
(c) Net asset value.
3.26 The Commission was of the further view that the use of a
particular method of valuation would depend upon the health of
the company being evaluated, the nature of the industry in
which it operated and the company's intrinsic strengths. The
depth of the capital markets would also have an impact on the
valuation.
3.27 The Commission also discussed several factors, which

impact valuation. Although valuation methods itself generate a
range of valuations in each case, some discounts may need to
be applied due to the following rea sons:-
(a) The lack of marketability.
(b) Minority Discount.
(c) Multi-Business Discount.
3.28 The Commission also sought to correct some erroneous

perceptions about valuation. There is a general perception that
since valuation models are quantitative, val uation is objective.
The Commission felt that though valuation does make use of
quantitative models, the assumptions made as inputs to the
model leave plenty of room for subjective judgments. At the
same time, there is no such thing as a precise estimate o f a
value. Even at the end of the most careful and detailed
valuation of a company, there could be uncertainty about the
final numbers, as they are shaped by assumptions about the
future of the company's operations.
3.29 Another perception sought to be co rrected by the

Commission was the relationship attributed between valuation
and market price. The benchmark for most valuations remains
the market price (either the company‟s own price, if it is listed,
or that of a comparable company). The Commission felt that
23
the valuation done before listing takes into account anticipated

factors, whereas market price reflects realised events that are
influenced by unanticipated factors. Moreover, a specific
valuation itself may not be valid over a period of time as it i s a
function of the competitive position of the company, the nature
of market in which it operates and Government policies.
Therefore, it may be appropriate to update or revise valuations.
3.30 Valuation Methodologies followed in the case of

Strategic Sale. The following four methodologies were
used for valuation of Public Enterprises: -
(a) Discounted Cash Flow (DCF) Method.
(b) Balance Sheet Method.
(c) Transaction Multiple /Comparable Companies/Relative

Valuation Method.
(d) Asset Valuation Method.
3.31 The Reserve Price was fixed on the DCF method in the
case of BALCO, CMC, HTL, VSNL, IBP, IPCL, HZL, ITDC and HCI
Hotel units. In the case of MFIL, the reserve price was not
fixed, whereas in the case of PPL, the reserve price was
determined by giving weightages of two to DCF value and one
to the Replacement Value based Asset Value.
3.32 A statement indicating the valuation of the Public

Enterprises, which were sold through strategic sale, under
different methods ofvaluation, the Reserve Price and Sal e Price
in each case is given at Annexure -8. The statement indicates
that the bid price realized by the Government was always more
than the Reserve Price, except in the case of PPL. The
statement on Reserve Price and the amount realised in respect
of disinvestment of hotel properties is at Annexure -9.
3.33 Valuation Methodologies followed in the case of Sale

of Small Portions of Equity. There were two methods
followed in valuation of sale of small portion of equities. They
were:-
24
(a) Auction Method. During 1991-96 shares were sold

by the auction method. The basis of fixation of the
Reserve Price is given herein under: -
(i) In the first year of disinvestment, i.e., 1991 -92,

Government sold shares in bundles belonging to Very
Good, Good and Average Public Enterprises. The
auctions were open only to financial institutions,
mutual funds and public sector banks which were
finally subjected to a reserve price computed on the
basis of the then prevailing formula of the Controller
of Capital Issues. The second tr anche of
disinvestment was based on reserve prices
recommended by the Industrial Credit and
Investment Corporation of India.
(ii) In the subsequent year (1992 -93), the shares

were sold individually in auctions which elicited more
competition with the pres ence of firms, corporate
bodies as well as individuals who had permission to
buy, hold and sale shares in India. Reserve prices at
the auctions were fixed with the help of professional
advice from merchant bankers and only bids in
excess of the reserve pri ces were accepted. Shares
were allotted in the order of bid prices, first to the
highest bidder, then to the next and so on until the
shares were exhausted or the reserve price reached,
whichever was earlier.
(iii) In 1993-94, the reserve price was the hi gher of

the highest price realized for each CPSE‟s share at
the last year‟s auction or average of the prices
indicated by the merchant bankers (IDBI and ICICI)
for that CPSE.Towards the end of 1993, the
government offered shares to employees in eight
Public Enterprises where disinvestment had already
occurred, at a 15 per cent discount to the average
price realized by the Government at the auctions held
during 1992-93.
25
(iv) The formula for fixation of reserve price was

revised in 1994 -95 as the higher of
(aa) average price indicated by the merchant

bankers engaged for that purpose; or
(ab) average price realized at any preceding

auction. Where there was more than one
previous auction in which the share had been
sold individually, the highest of the aver age
price realized at any of the preceding auctions
was considered.
(v) During 1995 -96, the reserve price was taken as

the average of the price indications given by a panel
of three institutions namely, IDBI, ICICI Securities
and SBI Capital Markets.
(vi) In the year 2005 -06, the Government sold 8 per

cent of the paid equity capital of MUL through the
auction method to public sector financial institutions
and public sector banks. A floor price of Rs.620 per
share was fixed for the share of the face value of
Rs.5. The shares were allotted to the bidders in the
order of the bid prices, first to the highest bidder and
then to the next and so on until the shares were
exhausted at a cut off price of Rs.660 per share. The
weighted average price worked out to Rs. 678.24 per
share in a bid range of Rs.660 -725. Another 0.01 per
cent was sold to employees at the cut -off price of
Rs.660 per share. Each employee was offered 20
shares. (g) In May, 2007 the Government sold its
residual 10.27 per cent paid up equity capita l in MUL
through the auction method to the public sector
financial institutions, public sector banks and Indian
mutual funds. A floor price of Rs.760 per share was
fixed for the share of face value of Rs.5. The
weighted average price of the shares sold wor ked out
to Rs.797.49 per share in a bid range of Rs.775 -850.
(b) Public Offerings. The Government through the

„Offer for Sale‟ route, divested all or a portion of its equity
26
in six listed companies viz. DCI, CMC, ONGC, GAIL, IBP

and IPCL. While disinvestin g in these six listed companies,
the Government was required to fix a Floor Price/Price
Band. The Floor Price/Price Band was fixed by the Group
of Ministers on the recommendations of a High -level Inter-
Ministerial Committee. While making its recommendation s,
the High level Committee was, by and large, guided by the
market price and its trends. In some cases, multiples
provided by BRLMs were also considered for assessing the
reasonableness of the recommended Floor Price/Price
Band. The Floor Price per share recommended in the cases
of CMC, GAIL, IBP and IPCL was Rs.475, Rs.185, Rs.620
and Rs.170 respectively. In the cases of DCI and ONGC,
the price bands of Rs.385 – 400 and Rs.680 – 750 per
share respectively were fixed.
27
DISINVESTMENT
TRANSACTIONS
4.1 Disinvestment transactions undertaken

can be classified into five main categories:
(a) Transactions involving the sale of

minority shareholding of the
Government, subject to the residual equity of the
Government remaining at least 51 per cent.
(b) Sale of majority shareholding in one CPSE to another

CPSE.
(c) Sale of a large block of shares in a CPSE (including

subsidiary of a CPSE) along with transfer of management
control to a strategic partner identified through a process
of competitive bidding. This w as termed as strategic sale.
After the strategic sale, the CPSE ceased to be a
Government Company as defined in Section 617 of the
Companies Act, 1956.
(d) Slump sale of 2 hotel units of HCI and other related

transactions during 1999 -00 to 2005-06.
(e) Sale of all or part of Government‟s residual

shareholding in disinvested Public Enterprises /companies
either through a public offering or private placement – viz.
CMC, IBP, IPCL, MUL and ICI. These five categories of
transactions are narrated separately bel ow.
Sale of Minority Shareholding in Public Enterprises
4.2 Disinvestment of Government‟s shareholding in Public

Enterprises started in 1991 -92. In that year Government
disinvested an average of about 8 per cent of the shareholding
in 30 Public Enterprises and realised Rs.3037.74 crore over two
auctions. The sale was made exclusively to financial
institutions, mutual funds and banks in the public sector on
28
competitive basis for the shares which were offered in mixed

bundles of Public Enterprises classifie d as Very Good, Good and
Average.
4.3 During 1992 -93, Government disinvested on an average

less than 5 per cent of the aggregate equity over three
auctions and realised a total amount of Rs.1,912.51 crore.
Unlike the case in 1991 -92, the shares were not b undled in
1992- 93 and were offered for sale individually by auction. The
auctions were open not only to public sector institutions, but
also to private firms, brokers and any person, who was legally
permitted to buy, hold and sell shares in India. Reserve price
for each CPSE‟s share was fixed with the help of professional
advice from merchant bankers and only bids in excess of the
reserve price were accepted.
4.4 During 1993-94, Government enlarged the range of

bidders to include FIIs. This was based on t he
recommendations of the Rangarajan Committee on
“Disinvestment of Shares in Public Sector Enterprises” which
were given in April, 1993. In March, 1994, small portions of
shareholding in six Public Enterprises were disinvested for an
amount of Rs.2282.16 crore which was received during 1994 -
1995. Towards the end of 1993 -94, Government made an offer
for sale to employees in eight Public Enterprises where
disinvestment had already occurred. The offer was for a
maximum of 200 shares per employee, subject to a ceiling of 5
per cent of the paid -up capital of CPSE and at a 15 per cent
discount to the average price realised by the Government at
the auctions held during 1992 -93. A total of Rs.333.57 crore
was collected by such sale to employees during 1994 -1995.
4.5 In October, 1994, the range of bidders was further

enlarged so as to include NRIs and OCBs. Small portions of
equity in 10 Public Enterprises was disinvested for a total
realisation of Rs.2,560.93 crore. In 1995 -96 small portions of
Government‟s shareho lding in four Public Enterprises was sold
realising Rs.168.48 crore. In 1996 -97, 0.39 crore shares of
VSNL were sold through a GDR issue realising Rs.379.67 crore
at a price of Rs.973.51 per share. In 1997 -98, 4.00 crore
shares held by Government along with 3.00 crore new shares of
29
MTNL were sold through a GDR issue. The Government thereby

realised an amount of about Rs.910 crore from this GDR issue.
4.6 During the year 1998 -99, Government sold a small portion
of its shareholding in one CPSE to another CPS E. Through this
mechanism, ONGC and IOC each purchased 4.85 per cent
shares of GAIL‟s equity shareholding. IOC purchased 10 per
cent of the shareholding of ONGC, whereas ONGC purchased 10
per cent of equity shareholding of IOC. In addition 0.90 crore
shares of CONCOR and 3.06 crore shares of GAIL were sold to
institutional investors in the domestic market while 1 crore
shares of VSNL were sold in the GDR market. The net
realisation for Government from these disinvestment
transactions in 1998-99 was Rs.5,371.11 crore.
4.7 During the years 1999 -2000 to 2002-03 the receipts fro m
sale of minority shares were minimal, since the emphasis
shifted to Strategic Sale. During 1999 -2000 the proceeds were
only from the sale of 0.10 crore shares of VSNL in the domestic
market and 13.50 crore shares of GAIL in the GDR market. In
addition, the remaining amount from the sale of shareholding in
one CPSE to another CPSE carried out in the previous year and
amounting to Rs.459.27 crore was also received, giving a total
receipt of Rs.1,479.27 crore during that year. During the
following years 2000 -01 to 2002-03 there were no receipts
from sale of minority shareholding.
4.8 In the year 2003 -04, after the Supreme Court judgement
in the case of HPCL/BPCL, the sale of Government‟s m inority
shareholding through public offers was resumed. The Offer for
Sale of 20 per cent of DCIL‟s paid up equity out of the
Government‟s shareholding was decided in July, 2003, while the
decision to sell small portions of Government‟s stake in GAIL
and ONGC was taken in December, 2003. The decision for sale
of Government‟s residual shareholding of 26% through an Offer
for Sale in IBP was taken in July, 2003. In February, and
March, 2004 these four issues raised Rs.12,757.61 crore. ONGC
was a single issue, which raised Rs.10,558.40 crore and
remains one of the largest offerings so far in the Indian
market.
30
4.9 This trend was continued in 2004 -05 in which the major
receipt of Rs.2,684.07 crore was from the sale of 43.29 crore
equity shares of Rs.10 each out of the Government‟s equity in
NTPC, along with a fresh issue of equity of a similar quantum
by NTPC through an IPO in October, 2004.
4.10 The total realisation from sale of minority shareholding of

equity in Public Enterprises has been Rs.33,543.56 cror e, which
is approximately two -third of the total receipts of Rs.51,608.58
crore from disinvestment till July, 2007.
Sale of Majority Shareholding to Public

Enterprises
4.11 There are only three instances where Government divested

itself of a majority sh areholding in a CPSE by selling the shares
to another CPSE without going through a process of competitive
bidding. In 2000 -01, 74.46 per cent of the equity of BRPL was
disinvested to IOC for Rs.148.80 cro re, 51.81 per cent of
equity in CPCL was sold to IO C for Rs.509.33 crore and 55.04
per cent of the equity of KRL was off -loaded to BPCL for
Rs.659.10 crore. Subsequently, it was felt that disinvestment
by sale of shares to Public Enterprises did not result in any of
the advantages normally associated with the block transfer of
majority shareholding, since the public sector character of the
company did not change. Thereafter, Government on 18th
September, 2002 issued guidelines that the Public Enterprises
should be prohibited fro m participating in disinvest ment
transactions, unless an exemption was specifically given in a
particular case. The total amount raised through the block sale
of shares in one CPSE to another CPSE was Rs.1317.23 crore
which is less than 3 per cent of the total amount of
Rs.51,608.58 crore raised from disinvestment till July, 2007.
Strategic Sale
4.12 MUL was the first Government company to be privatized.

It ceased to be a Government company in 1992, when
Government entered into an agreement with SMC allowing it to
raise its shareholding from 40 per cent to 50 per cent, by
subscribing to 22,04,860 shares of face value of Rs.100 each at
31
a price of Rs.269 per share. However, strategic sale as a policy

measure commenced in 1999 -2000 with the sale of 74 per cent
of the Government‟s equity in MFIL for Rs.105.45 crore.
Thereafter, twelve Public Enterprises (including four
subsidiaries of Public Enterprises), and seventeen hotels of
ITDC were sold to private investors along with transfer of
management control by the Government. In addition, t he
strategic sale of 33.58 per cent IBP‟s shareholding was effected
to IOC. IBP remained a CPSE after strategic sale, since IOC
held 53.58 per cent of its paid -up equity. The total realisation
from these strategic sale transactions was Rs.6,344.35 crore,
which is around one -eighth of the total amount of Rs.51,608.58
crore raised from disinvestment till 31s t July, 2007.
Sale of all or Part of the Residual Equity in

Privatised Public Enterprises
4.13 MUL was the first privatized CPSE to come out with an
IPO, which consisted of an Offer for Sale of 27.51 per cent of
MUL‟s paid up equity capital, out of Government‟s residual
shareholding of 45.79 per cent. The IPO, which was completed
in June, 2003 was oversubscribed by 8.92 times realizing
Rs.993.34 crore fo r the Government. Thereafter, in January,
2006 Government realised a sum of Rs.1,567.60 crore from the
sale of 8 per cent of equity out of its shareholding of 18.28 per
cent in MUL, to public sector financial institutions and banks.
Another, Rs.2.08 crore was received by the Government in
March, 2006 from the sale of 31,507 (0.01 per cent) equity
shares in MUL to employees of MUL. In May, 2007, the
Government realized Rs.2,366.94 crore from the sale of its
entire residual equity of 10.27 per cent in MUL to public sector
financial institutions, public sector banks and Indian mutual
funds.
4.14 In the year 2003 -04 Government‟s residual stake in two

other privatized Public Enterprises viz. CMC and IPCL was sold
to the public. Government also divested its share holding in ICI
Limited, a private company. Government thus, realized
Rs.6,398.27 crore from these transactions.
32
ACTIVITIES POST
DISINVESTMENT
5.1 In all cases of strategic sale, (except

hotel properties of ITDC and HCI),
Government/BBUNL (in the cas e of LJMC and
JCL being the holding company) retained a
part of the equity with it, though
management control was transferred to the strategic partner.
The percentage of shares sold in the first instance to the SP
varied from case to case. Except for the S HAs of HTL and LJMC,
other SHAs, provided for the manner of sale for the residual
equity. In some cases a „Put‟ option was made available to the
Government under which it was compulsory for the SP to buy
the shares being offered by the Government. In some cases a
„Call‟ option was made available to the SP. In some other
cases, both „Put‟ and „Call‟ options were made available. In all
the cases of both „Put‟ and „Call‟ options, the period in which or
the date from which the option could be exercised was pre -
defined. The principles for determining the price at which the
options were to be exercised was also predefined in the SHA.
The procedure of exercising the option was also provided in the
SHA. The Government retained at least 26 per cent
shareholding of the divested CPSE with it for a certain length of
time.
Excise of ‘Put’ or ‘Call’ options
5.2 Modern Food Industries (India) Limited. It is an

unlisted CPSE was privatised in January, 2000 through a sale of
74 per cent of the paid up equity. 26 per cent of the equity was
left with the Government. The SHA provided for a „Put‟ option
to the Government to sell the residual shares to the SP from
January, 2001 at higher of the Fair Market Value or the price at
which shares were sold in the strategic sale. The „Put‟ option
was followed by a „Call‟ option to SP. The „Put‟ option was
exercised by the Government on 28th November, 2002.
33
5.3 Bharat Aluminium Company Limited. It is an unlisted

CPSE in which 51 per cent of the equity was sold by the
Government in March, 2001. A „Call‟ option for the residual 49
per cent shares exercisable from 3rd March, 2004 at the higher
of the Fair Value or the strategic sale price plus 14 per cent
annual interest compounded half yearly after giving credit for
dividend received by t he Government, was available to SP.
5.4 CMC Limited. It was a listed CPSE, when Government

disinvested 51 per cent of the paid up equity through strategic
sale in October, 2001, leaving a residual equity of 32.31 per
cent with the Government, which got r educed to 26.25 per cent
after sale of shares to employees. The SHA provided for a „Put‟
option for the Government effective from 16th October, 2002 to
15 t h October, 2003 not exceeding 10 per cent of the paid up
equity out of the residual shares and from 1 6th October, 2003
to 15 t h October, 2004 for some or all of the remaining shares at
Fair Value as defined in the SHA. The „Call‟ option was provided
to the SP from 16th October, 2004 to 15th October, 2006 at
higher of the Fair Value or the Market Value of t he called
shares.
5.5 Videsh Sanchar Nigam Limited. It was a listed CPSE

when the Government disinvested 25 per cent of the paid up
equity capital through strategic sale in February, 2002, leaving
a residual shareholding of 27.97 per cent. Out of the res idual
shareholding, 1.85 per cent shareholding was sold to the
employees.
5.6 IBP Limited. The Government disinvested 33.58 per cent

of the paid up equity in February, 2002 in this listed CPSE
leaving a residual shareholding of 26 per cent. The SHA
provided for a „Put‟ option to the Government from 8th
February, 2003 to 7 t h February, 2005 at Fair Value and a „Call‟
option to the SP from 8th February, 2005 to 7th February, 2007
at Fair Value.
5.7 Paradip Phosphate Limited. The Government sold 74

per cent of the paid up equity capital in February, 2002 through
strategic sale in this unlisted CPSE leaving a residual
shareholding of 26 per cent. The shareholding of the
34
Government in PPL came down to 19.55 per cent, consequent to

a Rights Issue by the company , which was not subscribed to by
the Government. The SHA provides for a „Put‟ option right to
the Government for some or all of the residual shares held by
the Government at the time it exercises the put option at the
fair value of the put shares.
5.8 Hindustan Zinc Limited. The Government sold 26 per

cent of the paid up equity capital of the company through a
strategic sale in April, 2002, retaining a shareholding of 49.92
per cent in this listed CPSE. Out of the residual shareholding,
1.465 per cent shareholding was sold to the employees. The
SHA provided for the first „Call‟ option to the SP from 11th
October, 2002 to 10 t h October, 2003 for 18.92 per cent of the
equity at higher of the Market Value of the shares or strategic
sale price. This option was exercised by the SP in August, 2003
against which Government realised Rs.323.88 crore at the
strategic sale price.
5.9 Indian Petro Chemical Limited. The Government sold 26

per cent of the equity in this listed CPSE through strategic sale
in June, 2002 leaving a residual shareholding of 33.95 per cent
for which the SHA provided a „Put‟ option to the Government
from 4th June, 2004 to 3 r d June, 2005 and a „Call‟ option to the
SP from 4th June, 2005 to 3rd June, 2006 both at Fair Value.
The existing shareho lding of the Government in IPCL is 0.42
per cent.
5.10 Jessop and Company Limited. At the time of strategic

sale, BBUNL, a CPSE held 99 per cent of the paid up equity
capital of JCL, a listed company. BBUNL sold 72 per cent of the
paid up equity through t he strategic sale to Indo -Wagon
Engineering Limited (IWEL), leaving a residual shareholding of
27 per cent. The SHA provided for a „Put‟ option to BBUNL from
29th August, 2004 to 28 t h August, 2006 and a „Call‟ option to
the SP from 29th August, 2006 to 28t h August, 2008 both at
Fair Value, to be determined as per the SHA.
5.11 Maruti Udyog Limited. It was an unlisted Company when

the Government renounced a Rights Issue of 4.21 per cent of
the paid up equity in June, 2002, in favour of SMC, thereby
35
reducing its shareholding to 45.79 per cent. SMC paid Rs.1000

crore as control premium to the Government for renouncing the
Rights Offer. The RJVA provided for a „Put‟ option from 8th
November, 2003 to 8th July, 2005 at a price to be determined
through a pre -defined formula. The Government, however, sold
27.51 per cent out of its shareholding through an IPO in July,
2003 realising Rs.993.30 crore. Out of the residual
shareholding of 18.28 per cent, the Government sold 8 per cent
equity of MUL to public sector fina ncial institutions and public
sector banks in January, 2006 for Rs.1,567.60 crore and 0.01
per cent equity to the employees of MUL for Rs.2.08 crore in
March, 2006.
Sale of shares to Employees
5.12 Five SHAs relating to strategic sale provided for offer of

shares to employees. These are detailed are enumerated in
succeeding paragraphs.
5.13 Bharat Aluminium Company Limited. The SHA provided

for an offer of up to 5 per cent equity of the company out of
the residual shareholding of Government to the employ ees. A
final decision in the matter is yet to be taken.
5.14 CMC Limited. The SHA provided for an offer of not more
than 6.31 per cent of the equity of the company out of the
residual shareholding of Government to the employees. The
strategic sale was com pleted in October, 2001 and the offer of
shares to the employees was completed in June/July, 2002 at a
price of Rs.66 per share i.e. at one -third of the strategic sale
price of Rs.197 approximately. All regular employees of the
company including full time functional Directors of the
company, on the specified date, were eligible to acquire shares
under this scheme. 3,208 employees availed of this offer,
realising Rs.6.07 crore for the Government by subscribing to
6.06 per cent of the equity.
5.15 Videsh Sa nchar Nigam Limited. The SHA provided for

an offer up to 2 per cent shares of the company out of the
Government‟s residual shareholding to the employees. The
company ceased to be a Government company in February,
36
2002 and the offer to the employees was made in the same
month at one -third of the price offered by the strategic partner
or 1/3rd of listed market value calculated as the average of the
closing price on BSE for 30 days, whichever was less, subject
to a minimum of par value of Rs.10 per equity shar e. 52,64,555
shares representing 1.85 per cent equity of the company were
subscribed by the employees.
5.16 Hindustan Zinc Limited. The SHA provided for an offer

of up to 5 per cent equity of the company to the employees out
of the residual shareholding of the Government. It was decided
to offer the shares at one -third of the Listed Market Value or
one third ofstrategic sale price whichever was lower subject to
a minimum of the face value. Accordingly, in November, 2002
the shares were offered at the face value of Rs.10 per share
against a prevailing Listed Market Value of Rs.22.52 per share
and strategic sale price of Rs.40.50 per share. 61.90 lakh
shares or 1.465 per cent of the equity was subscribed by the
employees.
5.17 Indian Petro Chemcal Limited. The SHA provided for an

offer up to 5 per cent equity of the company out of Government
residual shareholding to the employees. The strategic sale was
completed in June, 2002. Thereafter, the offer of shares to the
employees was made in April, 2004 at one -third of the price at
which the shares were sold in February, 2004 through an Offer
for Sale i.e. Rs.170. Accordingly, 5 per cent shares were
offered to employees, out of which 4.58 per cent shares were
actually allotted at Rs.57 per share.
5.18 While the terms and conditions of sale of shares to

employees varied, there are some common features. A matrix
of distribution of shares among employees was adopted.
Secondly, the ratio of distribution from the lowest to the
highest level ranged between 1:2.75 and 1:5. Thirdly, the
regular employees including the functional Directors of the
Board at the time of disinvestment were eligible for subscribing
to the shares. Fourthly, in all the schemes, the shares were
offered at a discount to the prevailing price.
37
Post Closing Adjustments
5.19 In the case of four unlisted companies and the hotel

properties of HCI and ITDC, the Share Purchase
Agreement/Agreement to Sell provided for a Post Closing
Adjustment to cover the change in the financial status of the
company between the date upto which the audited accounts
were provided to the parties at the time of due diligence and
the date of actual disinvestment. The difference in the Net
Assets on the date of the last audited balance sheet and the
closing date was called post closing adjustment and depending
on whether there was an accretion or depletion of the Net
Assets, this amount become payable to the Government or SP.
5.20 The details of cases where Post Closing Adjustments were

provided for in the Share Purchase Agr eement/relevant
transaction agreement and the status of each case as given in
succeeding paragraphs.
5.21 Modern Food Industries (India) Limited. MFIL was

disinvested through sale of 74 per cent Government‟s equity to
HLL for an amount of Rs.105.45 crore. Financial bids were
invited/received on the basis of audited accounts of MFIL as on
31s t March, 1999. The transaction agreements were executed
on 31s t January, 2000.
5.22 Bharat Aluminium Company. 51 per cent equity of

BALCO was disinvested in favour of SIIL on 2nd March, 2001
for an amount of Rs.551.50 crore. The SHA and SPA were
signed on 2nd March, 2001 and the SP took over the
management control. The SPA provided that within 90 days
following the Closing Date, the Government and the Purchaser
shall jointly select an accounting firm to prepare a statement
showing the Closing Date Net Assets Amount.
5.23 Paradip Phosphate Limited. Financial bids for the

disinvestment of 74 per cent of the equity in PPL were invited
on the basis of audited accounts of the company as on 31s t
March, 2001. Only one financial bid of Zuari Maroc Phosphate
Pvt. Limited (ZMPPL) was received. The transaction agreements
for strategic sale were executed on 28th February, 2002.
38
5.24 Hindustan Teleprinters Limited. 74 per cent equity of

HTL was disinvested through Strategic Sale to HFCL on 16th
October, 2001. The Post Closing adjustment claim filed by the
strategic partner in terms of the provisions of SPA was not
acceptable to the Department of Telecommunications and the
matter is under arbitration.
5.25 Hotel Corporation of India Limited. HCI is a subsidiary

of Air India Limited. Transactions relating to two hotel
businesses of HCI, viz., Hotel Centaur Juhu Beach Mumbai and
Centaur Hotel Mumbai Airport, Mumbai and a subsidiary hotel
of HCI, viz., Indo Hokke Hotels Limited, Rajgir were based upon
the audited accounts of 31st March, 2001.
Post Disinvestment Employees Issues
5.26 There are two primary employees issues, which are voiced
with respect to privatization. First there is a concern about
change in the terms of services of employees and secondly
there is a concern that the reservation policy of the
Government for the Scheduled Castes/Scheduled Tribes and
other categories would be diluted.
5.27 Terms and conditions of se rvices. The concern of

the employees regarding alteration in the terms and conditions
of the services were sought to be addressed through provisions
in the Shareholders Agreement/Share Purchase Agreement
entered into with the Strategic Partner at the time of strategic
sale. The typical provisions are given below: -
(a) notwithstanding anything to the contrary in this

Agreement, it shall not retrench any of the Employees of
the Company for a period of 1 (one) year from the Closing
Date other than any dismis sal or termination of Employees
of the Company from their employment in accordance with
the applicable staff regulations and standing orders of the
Company or applicable Laws.
(b) notwithstanding anything to the contrary in this

Agreement, but subject to Sub-Clause (a) above, any
restructuring of the labour force of the Company shall be
39
implemented in the manner recommended by the Board

and in accordance with all applicable Laws;
(c) notwithstanding anything to the contrary in this

Agreement, but subject to Sub-Clause (a) above, in the
event of any reduction of the strength of the Company‟s
Employees, the SP shall ensure that the Company offers
its Employees an option to voluntarily retire on terms that
are not, in any manner, less favourable than the VRS
applicable before disinvestment.
5.28 Reservation Policy . In the strategic sale

transactions, the interest of SC/ST employees were also sought
to be protected through the provisions in the Shareholders‟
Agreement. A typical Recital clause provided in the SHA is
reproduced below: -
“The SP recognizes that the government in relation to its

employment policies follows certain principles for the
benefit of the members of the Scheduled Castes /
Scheduled Tribes, physically handicapped persons and
other socially disadvantaged categories of the society. The
SP shall use its best efforts to cause the Company to
provide adequate job opportunities for such persons.
Further, in the event of any reduction in the strength of
the employees of the Company, the SP shall u se its best
efforts to ensure that the physically handicapped persons
are retrenched at the end”.
40
CURRENT POLICY ON
DISINVESTMENT
6.1 In May, 2004, Government adopted the

National Common Minimum Programme
(NCMP), which outlines the policy of the
Government with respect to the public
sector. As per the NCMP, t he UPA
Government is committed to a strong and
effective public sector whose social objectives are met by its
commercial functioning. But for this, there is need for
selectivity and a strategic foc us. The UPA is pledged to devolve
full managerial and commercial autonomy to successful, profit -
making companies operating in a competitive environment.
Generally profit -making companies will not be privatized. All
privatizations will be considered on a tr ansparent and
consultative case -by-case basis. The UPA will retain existing
“navratna” companies in the public sector while these
companies raise resources from the capital market. While every
effort will be made to modernize and restructure sick public
sector companies and revive sick industry, chronically loss
making companies will either be sold -off, or closed, after all
workers have got their legitimate dues and compensation. The
UPA will induct private industry to turn around companies that
have potential for revival. The UPA Government believes that
privatization should increase competition, not decrease it. It
will not support the emergence of any monopoly that only
restricts competition. It also believes that there must be a
direct link between privatization and social needs – like, for
example, the use of privatization revenues for designated social
sector schemes. Public sector companies and nationalized
banks will be encouraged to enter the capital market to raise
resources and offer new investment avenues to retail investors .
Sale of Small Portions of Government Equity

Without Changing the Public Sector Character
6.2 The Government has also approved, in principle, the

following:
41
(a) listing of currently unlisted profitable Public

Enterprises (other than Navratnas) each with a Net Worth
in excess of Rs.200 crore, through an Initial Public
Offering (IPO), either in conjunction with a fresh equity
issue by the CPSE concerned or independently by the
Government, on a case by case basis, subject to the
residual equity of the Government remaining at least 51
per cent and the Government retaining management
control of the CPSE;
(b) the sale of minority shareholding of the Government

in listed, profitable Public Enterprises either in conjunction
with a Public Issue of fresh equity by the CPSE concerned
or independently by the Government subject to the
residual equity of the Government remaining at least 51
per cent and the Government retaining management
control of the CPSE; and
(c) constitution of a “Nat ional Investment Fund” (NIF).
6.3 On 6th July, 2006, Government decided to keep all

disinvestment decisions and proposals on hold, pending further
review. The disinvestment decisions covered under this decision
were: disinvestment of 5% of Government‟s h olding in Power
Finance Corporation Limited (PFC) riding piggy -back on fresh
issue of PFC; offer for sale, through book building process, of
15 percent equity in National Mineral Development Corporation
(NMDC) and 10 percent equity each in Neyveli Lignite
Corporation Limited (NLC) and National Aluminium Company
Ltd. (NALCO). Later, on 23rd November, 2006, Government
approved an IPO by PFC consisting of a fresh issue of equity
only. The IPO of PFC was completed in February, 2007.
National Investment Fund
6.4 In pursuance of the policy laid down in NCMP and the

decision of the Government to constitute NIF, the proposal for
its operationalisation was approved on 3rd November, 2005.
Accordingly, DoD has issued a Resolution on 23rd November,
2005 constituting „NIF‟ with the following objectives, structure
42
and administrative arrangements, investment strategy and

accounting procedure .
6.5 Objectives.
(a) The proceeds from disinvestment of Public Enterprises

will be channelised into NIF, which is to be maintained
outside the Consolidated Fund of India (CFI).
(b) The corpus of NIF will be of a permanent nature.
(c) NIF will be professionally managed to provide

sustainable returns to the Government, without depleting
the corpus. Selected Public Sector Mutual Funds will be
entrusted with the management of the corpus of NIF.
(d) 75 per cent of the annual income of NIF will be used to

finance selected social sector schemes, which promote
education, health and employment. The residual 25 per
cent of the annual income of the Fund will be used to meet
the capital investment requirements of profitable and
revivable Public Enterprises that yield adequate returns, in
order to enlarge their capital base to finance
expansion/diversification.
6.6 Structure and Administrative Arrangements. NIF will

be operated by the selected Fund Managers under the
„discretionary mode‟ of the Portfolio Management Scheme,
which is governed by SEBI guidelines. The entire work of NIF
will be supervised by the Chief Executive Officer (CEO) of NIF,
a senior officer of the Government. A part time Advisory Board
consisting of three eminent persons, with the requisite
expertise to be appointed by the Government, would advise
CEO on various aspects of the functioning of NIF.
6.7 Investment Strategy
(a) The broad investment strategy is to provide

sustainable returns without depleting the corpus.
43
(b) The investment strategy for NIF will be formulated by

CEO based on the advice of the Advisory Board so as to
ensure that Government has a hands -off relatio nship in
terms of the actual investment to be done by the Fund
Managers.
(c) Only broad guidelines are to be provided under the

“discretionary mode” to the Fund Managers, within which
individual investments would be made independently by
the Fund Managers. More detailed guidelines specifying
investment instruments and limits for investment in such
instruments will be separately specified in the agreements
to be entered into between the Fund Managers and CEO of
NIF on behalf of the Government.
(d) Other operational details such as allocation of funds to

the selected Fund Managers, negotiations of management
fee and charges to be paid to the Fund Managers, etc. will
be also decided by CEO based on the advice of the
Advisory Board. Appropriate mechanisms for regular
review and monitoring of the functioning of NIF, emerging
market trends and future prospects will be instituted.
6.8 Accounting Procedure.
(a) The receipts from disinvestment of Public Enterprises

will be deposited in CFI under the designated Hea d.
Thereafter, these amounts would be appropriated from the
CFI, with due approval, by the Department of
Disinvestment and transferred to the selected Fund
Managers through CEO of NIF.
(b) Income from NIF will similarly be deposited in CFI and

would be appropriated from it for specific purposes as per
the scheme of appropriation approved from time to time
by the Department of Expenditure.
Fund Managers of NIF
6.9 The following Public Sector Mutual Funds have been

appointed initially as Fund Managers to manage the funds of
44
NIF under the „discretionary mode‟ of the Portfolio Management

Scheme which is governed by SEBI guidelines.
(a) UTI Asset Management Company Limited
(b) SBI Funds Management (Private) Limited
(c) Jeevan Bima Sahayog, Asset Management Company

Limited
45
CONCLUSIONS
Merits of Disinvestment Process
7.1 The disinvestment process is advocated

for the following reasons: -
(a) The basis problem with PSUs is

neither the quality of assets nor the skilled manpower, but
the overall decision m aking system. These enterprises
would realize true potential only when they are privatized.
In Private Sector, the decision making process is quick
and decisions are linked with the competitive market
changes.
(b) The disinvestment process would bring in better

corporate governance, exposure to competitive, corporate
responsibility, improvement in work environment etc.
(c) The market participation in capital of PSUs through

stock exchanges would enable the market to discover the
latent worth of PSUs.
(d) The Loss making PSUs can be successfully revived by

asking the strategic partner to infuse fresh capital and
exercising excellent management control over sick PSUs.
Demerits of Disinvestment Process
7.2 The disinvestment of PSUs is criticized for the fo llowing

reasons:-
(a) Selling of profit -making and dividend paying PSU

would result in loss of regular source of income to the
government.
(b) There would be chances of „asset stripping‟ by the

strategic partner. Most of the PSUs have valuable assets
in the shape of plant and machinery, land and buildings
46
etc. It may be possible that the strategic partner may

very well dispose of these assets, make money, leaving
the PSUs as a sick enterprise.
(c) The Government‟s Policy or disinvestment includes

the disposal of both profit making, as well as, potentially
viable PSUs.
Suggestions
7.3 The studies on Disinvestment of public sector

undertakings have revealed that there is no clear -cut
framework or policy for disinvestment in India. The entire
proceeds of disinvestment are been used to mitigate the gap
fiscal deficit instead of using them for development of social
sector & building infrastructure. Therefore the following
suggestions are enumerated for a smooth and effective
disinvestment process: -
(a) The government has to form a policy framework for

the entire disinvestment process.
(b) The government should de -link the disinvestment

process from the budgetary exercise.
(c) Government should stop setting up of the targets in

every year annual budget and s hould have a long -term
plan.
(d) A separate fund should be created for disinvestment

and it should be kept under the control of president and
the fund should be utilized for building infrastructure and
developing the social sector.
(e) Timing of disinves tment is crucial and the

government should follow a specific method or process in
order to reap more chunks.
(f) The entire exercise of disinvestment should be

audited by not less than two reputed auditing firms in
47
order to have a fair and transparent pic ture of the entire

process.
(g) Finally, the government should have an 'Yearly Action

Plan' which should spell out the activities carried out in
that particular year and at the end of the year an 'Action
Taken Report' has to be submitted .
48
REFERENCES
1. „White paper on Disinvestment of Central Public Sector

Enterprise‟ by Department of Disinvestments, Ministry of
Finance, 31 July 2007 online at http://www.divest.nic.in/
2. „Disinvestment and Privatisation in India Assessment and

Options‟ by R Nagaraj, online at http://www.igidr.ac.in/
3. „Disinvestment of India‟s Public Sector Units ‟ by LM Bhole,

online at http://www.ircc.iitb.ac.in/
4. „Disinvestment Of Public Sector Ent erprises In India:

Policies And Challenges ‟ By Vibha Mathur, New Century
Publications online at http://www.infibeam.com/
5. „Does Disinvestment Improve Financial Performance? ‟ By

Dr. Himanshu Joshi , online at http://www.iitk.ac.in/
6. „PSU disinvestment‟ by Ila Patnaik online at

http://www.in dia-seminar.com/
7. „Disinvestment and the Destruction of the Indian Economy ‟

by N Bhattacharyya online at
http://www.revolutionarydemocracy.org/
8. http://india.gov.in/
9. http://www.indiastudychannel.com/
10. http://www.councilofstates.nic.in/
11. http://www.parliamentofindia.nic.in/
49

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‘Disinvestment in Public Sector Enterprises’

The founding fathers of our republic used the public

During the year 1997 -98, a major initiative has been

An overview of the objectives of the New Economic Policy

AYL Andrew Yule & Company Limited

IPCL Indian Petro Chemicals Corporation Limited

Overview of the Public Sector

1.1 Public sector enterprises are companies

1.2 There were five Public Enterprises owned by the Central

1.3 The public sector presence is predominant in public

1.4 In the tradable goods sector, the public sector is dominant

transportation, though nearly one third of oil refining capacity

1.5 The macro view of overall performance of these numbers

Growth of Investment in CPSEs

On the eve of the 2nd Five Year Plan (1.4.1956) 81 21

At the end of 3rd Five Year Plan (31.3.1966) 2410 73

On the eve of the 4th Five Year Plan (1.4.1969) 3897 84

At the end of 7th Five Year Plan (31.3.1990) 99329 244

At the end of 8th Five Year Plan (31.3.1997) 213610 242

At the end of 9th Five Year Plan (31.3.2002) 324614 240

As on 31.3.2003 335647 240

As on 31.3.2004 349994 242

As on 31.3.2005 357939 237

As on 31.3.2006 403705 239

As on 31.3.2007 421089 247

1.6 The following observations are made regarding the

(a) The capital employed has increased from Rs.

(b) Number of loss incurring CPSEs, it has come down

(c) Turnover increased to Rs.9,64,410 Crores in 2006-

(d) The turnover is equal to Rs.9,64,410 Crores in 2006 -

(e) Net profit has increased by 599% in 2006 -07 in

1.7 Disinvestment is a process in which the public undertaking

(a) Revenue Collection. The government is making a

(b) Improvement in Efficiency . This is being

(c) Market Discipline . Disinvestment is resorted to

(d) Mobilization. With the help of disinvestment

(e) Direct Public Participation. Such disinvestments

(f) Encourage Employee Ownership . This would

(g) Reduction of Bureaucratic Control . This may

2.1 The Statement of Industrial Policy of

2.2 The policy on disinvestment has evolved largely through

2.3 The Rangarajan Committee recommended in April, 1993,

Statement of Industrial Policy of 24th July, 1991 the following

(a) Arms and ammunition and allied items of defence

(b) Atomic Energy.

(c) Coal and lignite.

(d) Mineral oils.

(e) Mining of iron ore, manganese ore, chrome ore,

(f) Mining of copper, lead, zinc, tin, molybdenum and

(g) Minerals specified in the Schedule to the Atomic

(h) Railway transport.

2.4 In the budget speech of 1996 -97, the proposal to establish

Public Sector Disinvestment Commission

2.5 The Public Sector Disinvestment Commission was

covering 58 Public Enterprises , recommending strategic sale in

2.6 In the budget speech of 1998 –99, it was announced that,

2.7 In the budget speech of 1999 -2000, it was announced that

2.8 Strategic Public Enterprises. On 16th March, 1999, the

(a) Arms and ammunition and the allied items of defence