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Current AffairsEconomy

Disinvestment Policy – Shift from Disinvestment to Asset Monetisation

Monday, 16 March 20264 min read690 words29

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EconomyDeep Analysismonetary policyfiscal policy

In this article

ContextBackground & Historical EvolutionKey Points & FactsMulti-Dimensional AnalysisWay Forward

Context

The Government of India has recently shifted its policy focus from disinvestment and privatisation of Public Sector Enterprises (PSEs) to asset monetisation and value extraction. This change is marked by the introduction of the National Monetisation Pipeline (NMP) 2.0, which emphasizes generating revenue through leasing and dividends rather than outright sales of government assets. This shift comes in the wake of declining disinvestment revenues and increasing dividend income from Central Public Sector Enterprises (CPSEs). The policy aims to enhance the efficiency of public assets while maintaining government ownership, thereby addressing political and economic challenges associated with privatisation.

Background & Historical Evolution

The concept of disinvestment in India dates back to the early 1990s when economic liberalisation policies were introduced to reduce the fiscal burden and improve the efficiency of public sector enterprises. Over the years, various policies and frameworks have been established to guide the disinvestment process. The Disinvestment Commission was set up in 1996 to advise on the disinvestment of public sector undertakings (PSUs). In 2000, the Department of Disinvestment was established, later renamed the Department of Investment and Public Asset Management (DIPAM). The Public Sector Enterprises Policy of 2021 marked a significant push towards privatisation, advocating for government exit from non-strategic sectors and minimal presence in strategic sectors. However, challenges such as political resistance, structural inefficiencies, and limited private sector interest have hindered the disinvestment process. Consequently, the government has shifted its focus towards asset monetisation, as evidenced by the launch of the National Monetisation Pipeline in 2021, which aims to monetise brownfield infrastructure assets through leasing arrangements.

Key Points & Facts

  • The National Monetisation Pipeline (NMP) 2.0 represents a strategic shift from asset sales to asset monetisation, targeting ₹16.72 lakh crore by 2030.
  • Disinvestment revenues have seen a decline, with figures dropping from ₹16,507 crore in 2023-24 to ₹10,163 crore in 2024-25.
  • Dividend income from CPSEs has increased significantly, from ₹39,750 crore in 2020-21 to ₹74,128 crore in 2024-25.
  • The Public Sector Enterprises Policy (2021) initially emphasized privatisation and strategic disinvestment, but recent trends show a reduced emphasis on these strategies.
  • Asset monetisation focuses on leasing and generating revenue from underutilised assets without transferring ownership, involving private sector participation.
  • The government has removed the separate disinvestment category in Budget documents, merging it into "Miscellaneous Capital Receipts."
  • The Capital Restructuring Guidelines (2024) emphasize value creation in CPSEs and maximizing returns for the government.

Multi-Dimensional Analysis

Political & Constitutional Dimensions: The shift from privatisation to asset monetisation reflects a strategic move to address political resistance associated with the sale of public assets. While the government views this as a politically palatable approach, critics argue that it may lead to policy inconsistency and investor uncertainty.

Economic & Financial Impact: The focus on asset monetisation and dividends provides stable fiscal returns, reducing reliance on one-time asset sales. However, overdependence on dividends could weaken the long-term growth potential of CPSEs by limiting reinvestment capacity.

Social Dimensions: Asset monetisation retains public ownership, which may alleviate concerns about job losses and social equity associated with privatisation. However, the efficiency of public asset utilisation remains a concern.

Governance & Administrative Aspects: The new approach simplifies the administrative process compared to strategic disinvestment, but challenges persist in ensuring transparent bidding processes and strong regulatory oversight. Strengthening corporate governance in CPSEs is crucial to achieving the desired outcomes.

International Perspective: Globally, asset monetisation is seen as a viable alternative to privatisation, with countries like Australia and Canada successfully implementing similar strategies. India's approach aligns with international best practices, focusing on revenue generation while retaining public control.

Way Forward

Short-term measures should focus on enhancing the transparency and efficiency of the asset monetisation process through robust regulatory frameworks and transparent bidding processes. Medium-term reforms could involve selective privatisation of loss-making non-strategic sectors, as recommended by various committees. Long-term strategies should aim at strengthening corporate governance in CPSEs, reducing political interference, and ensuring a balanced approach between monetisation and strategic disinvestment. Learning from international best practices, such as Australia's asset recycling initiative, could provide valuable insights for sustainable public sector management. A sustainable dividend policy that balances revenue generation with adequate capital expenditure is essential to maintain the financial health of CPSEs.

What can be asked in exam?

  • •Prelims angle: The National Monetisation Pipeline (NMP) was launched in 2021.
  • •Prelims angle: Disinvestment revenues fell from ₹16,507 crore in 2023-24 to ₹10,163 crore in 2024-25.
  • •Prelims angle: Dividend income from CPSEs increased from ₹39,750 crore in 2020-21 to ₹74,128 crore in 2024-25.
  • •Mains angle: Discuss the implications of India's shift from disinvestment to asset monetisation on fiscal policy. (GS-III, 250 words)
  • •Mains angle: Analyze the challenges and opportunities of asset monetisation as a strategy for public sector reform in India. (GS-III, 250 words)

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OPSC PYQ 1 (2022) — Science

Genetic engineering, a revolutionary branch of biotechnology, continues to evolve rapidly, transforming the way we approach medicine, agriculture and various scientific endeavours. Recent developments in this field highlight both the immense potential and ethical considerations that come with the power to manipulate DNA. In the medical realm, gene editing technologies like CRISPR-Cas9 have gained prominence. These tools offer unprecedented precision in modifying genes, holding promise for treating genetic disorders. In a groundbreaking clinical trial, researchers successfully used gene editing to treat sickle cell anaemia. The patient’s own modified cells were reintroduced into their body, resulting in reduced symptoms and an improved quality of life. In agriculture, genetic engineering is driving advancements in crop production and food security. The development of Genetically Modified (GM) crops has enabled plants to resist pests, withstand harsh climates and improve nutritional content. For instance, GM rice has been biofortified to contain higher levels of essential vitamins, potentially combating malnutrition in regions where rice is a staple food. However, these advancements also raise ethical concerns. The potential for creating “designer babies” through gene editing has sparked debates about the boundaries of genetic manipulation. The question of whether it’s ethical to alter human DNA to enhance physical or cognitive traits continues to challenge bioethicists, policymakers and society at large. Data indicates the exponential growth of genetic engineering research. In the past decade, the number of scientific publications related to CRISPR technology has multiplied significantly. In 2010, there were approximately 150 CRISPR-related publications; by 2020, that number had soared to over 9,000. This surge demonstrates the profound impact of genetic engineering on the scientific community. As we navigate this brave new world of genetic engineering, striking a balance between innovation and ethical considerations remains paramount. The potential to cure genetic diseases, enhance food security and make leaps in scientific understanding is immense. However, careful consideration and collaboration are necessary to ensure that the benefits are realized while addressing the ethical complexities that accompany these technological breakthroughs.

Which gene editing technology has gained prominence recently?

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EMBEZZLE

In the following question, choose the word which best expresses the meaning of the given word: EMBEZZLE

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How many pairs of letters are there in the word 'CASTRAPHONE' which have as many letters between them in the word as in the alphabet?

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Free sample · Question 1 of 3

Science · 2022

Direction / Passage

Genetic engineering, a revolutionary branch of biotechnology, continues to evolve rapidly, transforming the way we approach medicine, agriculture and various scientific endeavours. Recent developments in this field highlight both the immense potential and ethical considerations that come with the power to manipulate DNA. In the medical realm, gene editing technologies like CRISPR-Cas9 have gained prominence. These tools offer unprecedented precision in modifying genes, holding promise for treating genetic disorders. In a groundbreaking clinical trial, researchers successfully used gene editing to treat sickle cell anaemia. The patient’s own modified cells were reintroduced into their body, resulting in reduced symptoms and an improved quality of life. In agriculture, genetic engineering is driving advancements in crop production and food security. The development of Genetically Modified (GM) crops has enabled plants to resist pests, withstand harsh climates and improve nutritional content. For instance, GM rice has been biofortified to contain higher levels of essential vitamins, potentially combating malnutrition in regions where rice is a staple food. However, these advancements also raise ethical concerns. The potential for creating “designer babies” through gene editing has sparked debates about the boundaries of genetic manipulation. The question of whether it’s ethical to alter human DNA to enhance physical or cognitive traits continues to challenge bioethicists, policymakers and society at large. Data indicates the exponential growth of genetic engineering research. In the past decade, the number of scientific publications related to CRISPR technology has multiplied significantly. In 2010, there were approximately 150 CRISPR-related publications; by 2020, that number had soared to over 9,000. This surge demonstrates the profound impact of genetic engineering on the scientific community. As we navigate this brave new world of genetic engineering, striking a balance between innovation and ethical considerations remains paramount. The potential to cure genetic diseases, enhance food security and make leaps in scientific understanding is immense. However, careful consideration and collaboration are necessary to ensure that the benefits are realized while addressing the ethical complexities that accompany these technological breakthroughs.

Which gene editing technology has gained prominence recently?

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