The Government of India has approved the proposal of Department of Investment and Public Asset Management for laying down the procedure and mechanism for strategic disinvestment of Central Public Sector Enterprises (CPSEs)

The Cabinet Committee on Economic Affairs(CCEA), chaired by the Prime Minister Shri Narendra Modi, has given its approval for the procedure and mechanism for strategic disinvestment. This has also been announced by the Finance Minister in his Budget Speech yesterday. Ministry of Finance has issued instructions on procedures and processes for strategic disinvestment.

In the past strategic disinvestment would start with the recommendation of the Disinvestment Commission. In a major departure, in the approved process the NITI Aayog would perform the role of erstwhile Disinvestment Commission. In fact, the role of NITI Aayog is larger as it would also identify CPSEs for strategic disinvestment and suggest methods for valuation of the CPSE apart from advising the Government on mode and percentage of shares to be sold in a CPSE.

Government has also approved the constitution of Core Group of Secretaries on Disinvestment (CGD) headed by the Cabinet Secretary to Supervise and monitor the process of implementation of CCEA decisions on strategic disinvestment.

The Administrative Department/Ministry would be responsible for valuation of the CPSE. They would also appoint asset valuers for strategic disinvestment. An Evaluation Committee (EC) would consider the valuation and fix the Reserve Price. This would be an inter-ministerial committee headed by FA level officer.

The Government would also appoint the Independent External Monitor (IEM) to vet the process and settle grievances

Ministry of Finance has also been authorized to put in place an appropriate mechanism for protection of strategic disinvestment.

Strategic disinvestment procedure centralises NITI Aayog role and establishes supervision, valuation and monitoring safeguards with Independent External Monitor. Strategic disinvestment procedure creates an institutional framework where NITI Aayog identifies CPSEs, recommends valuation methods and advises on mode and share percentage; a Core Group of Secretaries headed by the Cabinet Secretary will supervise implementation. The Administrative Ministry must carry out valuation and appoint asset valuers; an inter ministerial Evaluation Committee chaired at FA level will fix the reserve price. An Independent External Monitor will vet the process and address grievances, and the Ministry of Finance may put in place protective mechanisms for the disinvestment process.