From Privatisation Push to Value Extraction: India’s Evolving Disinvestment and Asset Monetisation Strategy

Why in News ?

Since the announcement of the revamped Disinvestment Policy (2020) and the Public Sector Enterprises (PSE) Policy, 2021, the Union Government initially emphasised strategic disinvestment and privatisation.

However, recent policy developments — including the launch of the National Monetisation Pipeline (NMP) 2.0 — indicate a clear shift from outright asset sales to value extraction through dividends and asset monetisation.

The current approach prioritises leasing of brownfield assets and higher dividend payouts instead of large-scale privatisation.

Background and Context

Evolution of India’s Disinvestment Policy

India’s disinvestment journey began in the early 1990s as part of economic liberalisation reforms. Initially, the focus was on minority stake sales to mobilise fiscal resources without relinquishing control.

The policy gained sharper ideological clarity post-2020, when the government announced a revamped framework emphasising:

• Exit from non-strategic sectors
• Minimum presence in strategic sectors
• Strategic disinvestment where private sector capacity exists

The underlying rationale was that the government should minimise direct business operations, allowing private firms to manage enterprises more efficiently.

Original Privatisation Push (2020–21)

The Public Sector Enterprises Policy (2021) categorised sectors as strategic and non-strategic, proposing:

• Privatisation of CPSEs in non-strategic sectors
• Limited number of CPSEs in strategic sectors
• Strategic sale and transfer of management control

This signalled an intent to reduce the state’s commercial footprint.

Declining Disinvestment Revenues

Temporary Surge

In 2022–23, disinvestment revenue reached ₹35,294 crore — aided by stake sales in companies such as:

• Oil and Natural Gas Corporation (ONGC)
• Life Insurance Corporation of India (LIC)
• GAIL (India) Limited (GAIL)
• Indian Railway Catering and Tourism Corporation (IRCTC)

This ended a four-year declining trend.

Subsequent Decline

Disinvestment proceeds fell sharply thereafter:

• ₹16,507 crore (2023–24)
• ₹10,163 crore (2024–25)
• ₹15,562 crore (till date in 2025–26)

Policy signals reflecting reduced emphasis on privatisation include:

• Removal of separate disinvestment category in Budget documents
• Disinvestment receipts merged into “Miscellaneous Capital Receipts”
• No annual disinvestment targets

Reasons for Reduced Privatisation

1. Limited Private Sector Interest

Challenges included:

• Large employee headcounts
• Loss-making operations
• Structural inefficiencies
• Political and labour resistance

These factors made several CPSEs unattractive to investors.

2. Increasing Focus on Dividend Income

Under the 2020 Consistent Dividend Policy, the Department of Investment and Public Asset Management (DIPAM) advised CPSEs to:

• Pay higher dividends
• Optimise use of cash reserves
• Balance capital expenditure and profitability

Dividend receipts rose significantly:

• ₹39,750 crore (2020–21)
• ₹74,128 crore (2024–25)
• ₹59,730 crore (so far in 2025–26)

Dividend income now exceeds disinvestment proceeds.

Asset Monetisation as the New Strategy

National Monetisation Pipeline (NMP)

Launched in 2021, NMP focuses on monetising brownfield infrastructure assets via leasing arrangements.

Key features:

• No transfer of ownership
• Private sector participation
• Revenue generation from underutilised assets

Approximately 90% of the ₹6 lakh crore target (2021–25) has reportedly been achieved.

National Monetisation Pipeline 2.0 (2025–30)

• Target: ₹16.72 lakh crore
• Focus sectors:
  • Transport infrastructure
  • Energy assets
  • Telecom
  • Warehousing

This marks a significant expansion of monetisation as a fiscal tool.

Significance of the Shift

1. Fiscal Stability

Provides predictable revenue through dividends and lease payments instead of one-time asset sales.

2. Political Acceptability

Asset monetisation faces less resistance compared to full-scale privatisation.

3. Retention of Ownership

The government retains control while unlocking asset value.

4. Improved Asset Utilisation

Private participation enhances operational efficiency in infrastructure use.

5. Macroeconomic Management

Helps fund infrastructure development without significantly expanding fiscal deficits.

Advantages of the New Approach

• Fiscal Benefits: Stable revenue streams and reduced controversy.
• Economic Benefits: Encourages private efficiency while preserving public ownership.
• Administrative Simplicity: Less complex than strategic disinvestment processes.

Challenges and Concerns

Fiscal Risks

Excessive dividend extraction may reduce reinvestment capacity of CPSEs, weakening long-term growth.

Structural Inefficiencies

Monetisation does not resolve managerial inefficiencies within CPSEs.

Market Risks

Private participation depends on economic conditions; revenues may fluctuate.

Policy Inconsistency

Shifting from privatisation to monetisation may create uncertainty among investors.

Governance Concerns

Need for transparent bidding, strong regulation, and professional management.

Way Forward

• Adopt a calibrated mix of selective privatisation and monetisation
• Strengthen corporate governance and reduce political interference
• Maintain sustainable dividend policy aligned with capital expenditure needs
• Ensure transparent and competitive asset leasing processes
• Address operational inefficiencies within CPSEs