Why is the Government of India disinvesting its equity in the Central Public Sector Enterprises (CPSEs)?

1. The Government intends to use the revenue earned from the disinvestment mainly to pay back the external debt.
2. The Government no longer intends to retain the management control of the CPSEs.

Which of the statements given above is/are correct?

1. 1 only
2. 2 only
3. Both 1 and 2
4. Neither 1 nor 2

Explanation

Both statements are incorrect

• The Government of India undertakes disinvestment in Central Public Sector Enterprises (CPSEs) mainly to raise resources for public expenditure, reduce fiscal deficit, and improve efficiency in public sector enterprises. The proceeds are generally used for developmental spending and budgetary needs, not specifically to repay external debt.
• Disinvestment does not necessarily mean transferring management control. In many cases, the government reduces only a part of its equity while retaining majority ownership and management control. Transfer of management occurs only in specific cases of strategic disinvestment, not in all disinvestment exercises.

Answer: (d) Neither 1 nor 2 | Difficulty Level: Easy