DIPAM to address Divestment in PSUs

dipam

Introduction

Union Government of India renamed the Department of Divestment to DIPAM (Department of Investment and Public Asset Management) on April 20, 2016.
This was formally announced in the Union budget 2016 - 2017 by Finance Minister Mr. Arun Jaitley

Need for DIPAM

  • Highly stressed PSUs 
  • Inefficient management structure in loss making PSUs 
  • Increase in loss making PSUs 
  • Rapidly rising non performing assets of Banks 
  • NITI Aayog has identified 74 loss making PSUs 
  • Among these 8 PSUs are identified to be closed this fiscal according to Union budget 2016 - 2017 

Purpose of DIPAM

  • Proper management of Government investments in equity 
  • Divestment in Central Public Sector Undertakings (CPSUs) 
  • To advise government on financial restructuring matters of CPSUs 
  • To attract investment through capital markets 
  • To address issues of capital restructuring, bonus shares, dividend etc in CPSUs 

Background

  • NDA government (1999 – 2004) was aggressive in divestment and privatizing loss making PSUs 
  • NDA earlier privatized more than a dozen companies 
  • UPA government buried this divestment regime in their rule 
  • Now, BJP is aiming to revive divestment again through DIPAM 

Earlier Divested PSUs

  • Some of the divested PSUs during the Atal Bihari Vajpayee led NDA government include 
  • Videsh Sanchar Nigam Limited (VSNL) 
  • Bharat Aluminium Company (BALCO) 
  • CMC Ltd 
  • HZL (Hindusthan Zinc Ltd) 
  • Hotels 

DIPAM Functioning

  • DIPAM will function under the finance ministry of India 
  • Head Quarters located in Delhi 
  • DIPAM will deal with the sale or divestment of equity in CPSUs 
  • DIPAM will manage government investments in equity 
  • DIPAM uses Open For Sale (OFS), private placement, stake sale, strategic sale etc to divest CPSUs 
  • All divestments to be handled by DIPAM or on the advice of DIPAM by the concerned ministry 

DIPAM Progress

  • “Invest India” was the official agency for promotion of investment in India 
  • Main aim is to provide facilities for investment in India 
  • This is to be merged with DIPAM 
  • DIPAM works closely with “Make In India” and predicted to be first and foremost place for investors 
  • The experts and DIPAM team will provide the potential investors with the various opportunities existing in various sectors 
  • It will guide the investors from incubation to establishment and after care services 
  • DIPAM expedites regulatory provisions and approvals 
  • DIPAM will carry out privatization of PSUs in due course by transforming the poor or loss making PSUs as infrastructure to new potential investors through “Make In India’ 

Current Implications

  • NITI Aayog sell off 8 loss making PSUs for 56500 crore through Divestment 
  • Among this, 20500 crore to be divested through strategic sale 
  • Rest 30000 crore to be divested through stake sale 
  • DIPAM to garner more than 16000 crore by November end through share buy backs and offer for sale (OFS) route of Divestment 
  • PSUs involved in Share buy back include NALCO, NMDC, Coal India, MOIL and Bharat Electronics accounting to 13500 crore 
  • NHPC Stake sale amounting to 3350 crore 
  • NTPC and IOC carry out Divestment through employee subscriptions 
  • SBI merger with its associate banks and Bharatiya Mahila Bank on share swap ratio basis approval on August 18, 2016 

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