Wednesday, March 4, 2015

Finance Article

5 smart things to know about disinvestment

Disinvestment is when the government sells the equity shares it holds in public sector units (PSUs) to individuals or institutions.

Disinvestment transfers the ownership of shares from government to another entity, at market prices and creates gains for the government depending on the price.

It is done when the PSU is not profitable or the government does not want to continue in any business since the private sector has penetrated that business

When funds raised from disinvestment are used to meet routine revenue expenditure, it is undesirable as an asset is sold without creating another asset.

Disinvestment has become a significant source of revenue for the government; Rs 40,000 crore is the estimated amount to be raised in financial year 2014-15.