Question

As the Disinvestment Commission has observed, “the essence of a long-term disinvestment strategy should be not only to enhance budgetary receipts, but also minimise budgetary support towards unprofitable units. Also, it must ensure the long-term viability and sustainable levels of employment in such units.”

Justify this disinvestment strategy adopted by the Indian Government.

Hint:

Use the Commission words. The strategy cuts the fiscal burden of loss-making PSUs, improves efficiency and discipline, keeps units viable with jobs, and attracts FDI.

Answer 1

Step 1: Understand the strategy:
The Commission says that disinvestment should raise money for the budget and also reduce support to unprofitable units.
It should also keep these units viable in the long run and protect employment in them.

Step 2: Justification 1: lower fiscal burden:
Loss-making public sector units draw money from the budget every year.
Privatising them cuts this burden and frees funds for other needs of the government.

Step 3: Justification 2: better efficiency and long-term viability:
Private ownership brings financial discipline, modern methods and better management.
This makes the units viable for a long time, so jobs in them are secured.
It can also attract greater foreign direct investment (FDI) into these units.

Final Answer:
The strategy is justified because it reduces the fiscal burden of loss-making PSUs, improves efficiency and discipline, secures long-term viability and employment, and attracts FDI.