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Tags Current Affairs

Government’s new policy on strategic sector

Date: 23 July 2020 Tags: Miscellaneous

Issue

The government will soon come out with a policy on strategic sectors and simultaneously kick into motion a process of complete privatisation for companies in the non-strategic sectors.

 

Background

This is the first time since 1956 that the government has said it will not have state-owned companies in the non-strategic sector — and that the number in the strategic sectors too would be reduced.

 

Details

  • Banking, insurance, defence, and energy are likely to be part of the strategic sector list.

  • In all other sectors, the government plans to privatise public sector enterprises, depending upon feasibility.

  • The number of enterprises in strategic sectors will be only one to four, and others would be privatised/merged/brought under a holding company structure.

  • The policy will put out a “general framework” — and that specific decision on which company is to be privatised, merged, or put under a holding company structure, would be taken later on.

  • This is expected to be a long-term process rather than a one-time move on the privatisation of companies. After inter-ministerial consultations to finalise strategic sectors, the policy will be put up before approval of the Union Cabinet.

  • The government has already set in motion privatisation 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 Life Insurance Corporation (LIC) through an initial public offer (IPO), and the sale of equity in IDBI Bank to private, retail and institutional investors.

  • The emphasis on privatisation could see companies in chemicals and infrastructure space being privatised, while the government has stated its intent to reduce the number of state-owned banks. This could see some smaller banks being privatised in due course.

  • A holding company structure could also be used to house equity of smaller banks in one entity. The government has shifted its focus to having a few very large banks under its fold, and a decision regarding the smaller banks is expected after the policy is unveiled.

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