Budget 2022: What is meant by strategic sale

NEW DELHI: The process of transferring or selling a substantial portion (up to 50 per cent or higher) of ownership and control of a public sector enterprise to some other entity is known as strategic sale.


Whereas, divestment is when the government sells off subsidiary assets, investments or divisions so as to maximise the value of the parent company.

Companies under strategic sale or divestment
The government is selling off its 100 per cent stake in Air India. It also plans to sell its entire stake in Air India Express and 50 per cent stake in Air India SATS Airport Services Pvt Ltd. Tata Group is believed to have submitted an EoI for buying stakes in Air India.

Another major company under divestment currently is Bharat Petroleum Corporation Private Limited (BPCL). Anil Agarwal-controlled Vedanta Group has submitted an expression of interest (EoI) for buying the government's 53 per cent stake in BPCL.

Shipping Corporation, BEML, Concor, Neelachal Ispat, IDBI Bank and LIC are some of the other major companies to be divested by the Centre.

Strategic sales pushed off to FY22
Sale of five large PSUs for which the government sought interest from potential buyers has been pushed till FY22.

For the 2020-21 fiscal, the government had set a disinvestment target of Rs 2.10 lakh crore. Of this, Rs 1.20 lakh crore will come from disinvestment of public sector undertakings and another Rs 90,000 crore from stake sale in financial institutions.

However, so far this fiscal, the government has netted Rs 17,957 crore through minority stake sale in CPSEs and share buybacks.

Difference between strategic sale and divestment
When government sells majority shares of any central public sector enterprise it is strategic sale. In such cases, ownership of entity is given up by the government.

Whereas, in divestment minority shares of a public sector enterprise is sold to another entity --either public or private. In this, ownership of the enterprise is retained by the government.

What finance minister said
Finance minister Nirmala Sithraman had exclaimed that the government intends to continue with public investments while pressing ahead with the strategic sale of state-run companies.

Further, Sitharaman said that the government was clear about moving ahead with the strategic sale of companies cleared by the Cabinet.

She also assured industrialists that public expenditure would continue.


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