The process of disinvestment seems to have taken off in full-fledged manner, but at the same time there are caution bells from a few global experiences.

One of the most influential decisions taken by the Indian Government is to privatize the Indian public sector enterprises by inviting private sector players aiming at minimize its role in business. Not only India, many countries across the world have been experiencing a massive privatization since early 1980s. However, India has reacted during 1990s to the global trend. It was in 1991, under the leadership of the then prime minister P V Narasimha Rao, the finance minister Manmohan Singh, the Disinvestment Bill was passed in the Parliament. The main objectives behind the disinvestment were reduction of government's role in public sector undertakings; direct the resources of the government towards a meaningful purpose i.e., social welfare; improving efficiency and profitability in the public sector undertakings. In India, disinvestment has taken place in phases. The first was from 1991-92 to 1997-98 and second from 1998 till date. When the bill was passed around 17 industries were reserved for public sector enterprises. With the course of time the number reserves has been reduced to only three. By the disinvestment, the Indian Government has reduced its stake in 47 companies.

During the first phase of the disinvestment it was decided to divest a minority stake in select Public Sector Undertakings (PSUs). The companies were categorized into very good, good and average and then the minority shares of these companies were bundled and sold by auction.

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