From UPSC perspective, the following things are important :
Prelims level : Strategic and non-strategic sectors
Mains level : Disinvestment of CPSEs
The government will soon come out with a policy on strategic sectors and simultaneously kick into motion a process of complete privatization for companies in the non-strategic sectors.
Try this question for mains:
Q. “Privatisation of CPSEs can lead to the conversion of public monopoly to a private monopoly.” Analyse.
What are Strategic and Non-strategic Sectors of India?
- An industry is considered strategic if it has large innovative spillovers and if it provides a substantial infrastructure for other firms in the same or related industries.
- Earlier, the strategic sectors were defined on the basis of industrial policy.
- The government classified Central Public Sector Enterprises (CPSEs) as ‘strategic’ and ‘non-strategic’ on the basis of industrial policy that keeps on changing from time-to-time.
According to this, the Strategic sector PSUs are:
- Arms & Ammunition of defence equipment
- Defence aircraft & warships
- Atomic energy
- Applications of radiation to agriculture, medicine and non-strategic industry
Banking, insurance, defence, and energy are likely to be part of the strategic sector list. All other PSUs apart from the strategic sectors fall under Non-strategic Sector including Power Discoms.
A change in policy post-Atmanirbhar
- Under the Self-sufficiency move, the proposed policy would notify the list of strategic sectors requiring the presence of at least one state-owned company along with the private sector.
- In all other sectors, the government plans to privatize public sector enterprises, depending upon the feasibility.
- The number of enterprises in strategic sectors will be only one to four, and others would be privatized/merged/brought under a holding company structure.
Will it help privatization?
- The government has already set in motion privatization plans for large PSU companies BPCL, Air India, Container Corporation of India, and Shipping Corporation of India.
- Budget 2020-21 had announced plans to sell part of the Centre’s stake in LIC through an initial public offer (IPO), and the sale of equity in IDBI Bank to private, retail and institutional investors.
- The emphasis on privatization could see companies in chemicals and infrastructure space being privatized, while the government has stated its intent to reduce the number of state-owned banks.
- This could see some smaller banks being privatized in due course.