PSEs empowered to undertake disinvestment of their subsidiaries

New Delhi, May 18, 2022

The Union Cabinet today approved a proposal for empowering the Boards of Directors of the holding/parent public sector enterprises to recommend and undertake the process for disinvestment (both strategic disinvestment and minority stake sale) or closure of any of their subsidiaries, units or stake in joint ventures.

The Cabinet has also empowered the Alternative Mechanism to accord "in principle" approval for disinvestment (both strategic disinvestment and minority stake sale), closure of subsidiaries or units, sale of stakes in joint ventures (JVs) of such PSEs [except the disinvestment (minority stake sale) of Maharatna PSEs which was delegated to them and review the process of disinvestment/closure by parent/holding PSEs.

An official press release said that, as per the decision, the process for undertaking the strategic disinvestment transactions/closures to be followed by the PSEs should be open, based on the principles of competitive bidding and consistent with the guiding principles to be laid down. For strategic disinvestment, such guiding principles will be laid down by DIPAM. For closure, DPE shall issue guiding principles.

Presently, the Boards of Directors of holding/parent PSEs have been delegated certain powers under the Maharatna, Navratna and Miniratna categories to make equity investment to establish financial joint ventures and wholly-owned subsidiaries and undertake mergers or acquisitions, subject to certain ceilings of net worth. However, the Boards do not have powers for disinvestment/closure of their subsidiaries/units/stake in JVs, except some limited powers given to Maharatna PSEs for minority stake disinvestment of shareholding in their subsidiaries.

Therefore, approval of the Cabinet/CCEA was needed by holding/parent CPSEs, for disinvestment (both strategic disinvestment and minority stake sale)/closure of their subsidiaries/units or sale of their stakes in a JV, irrespective of the size of operations/capital deployed of such subsidiaries, etc. In line with the spirit of the new PSE policy, 2021 to minimize presence of Government PSEs and for functional requirement, further delegation in this matter has been provided through this decision, the release said.

The proposal intends to reform the functioning of PSEs, by allowing greater autonomy to the Boards of Directors of the holding PSEs for taking decisions and recommend for timely existing from their investment in subsidiaries/units or JVs, which will enable them to monetize their investment in such subsidiaries/units/JVs at an opportune time or close their loss-making and inefficient subsidiary/unit/JV at the right time.

"This will result in expeditious decision making and saving of wasteful operational/financial expenditure by the PSEs," the release added.

NNN

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