After a period of lull, the process of disinvestments has gathered momentum. This has made the Government more confident and set a realistic but ambitious target for the next year.

With the divestment of IBP and VSNL, the process of disinvestments seems to be catching up. Though the Government would fall short of the disinvestments target for the fiscal 2001-2002 these divestments have boosted the spirit of the process considerably. The Government has indicated that Maruti Udyog Limited along with five other PSUs would be disinvested by the end of March 2002. Overall, it has been a good fiscal for disinvestments activity by any standards. In the previous two fiscals, the disinvestments were a fraction of the set targets.

The policy on disinvestments has evolved over a period of time. The process started when the Chandrashekhar government formulated a policy to divest 20 percent of the government equity in selected public sector units in favor of public sector institutional investors. The objective of the policy was stated to broad-base equity, improve management, enhance availability of resources for these PSUs and yield resources for the exchequer.

In 1993, the Rangarajan Committee, which was formulated to study the disinvestments of shares, emphasized the need for substantial disinvestment. It stated that the percentage of equity to be divested could be up to 49 percent for industries explicitly reserved for the public sector. It recommended that in exceptional cases, such as enterprises which had a dominant market share or where separate identity had to be maintained for strategic reasons, the target public ownership level could be kept at 26 percent.

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