New Public Sector Enterprise Policy, 2021

The New Public Sector Enterprise Policy, 2021 sets out where the Union government intends to retain ownership of public enterprises and where it intends to withdraw. It divides sectors into strategic and non-strategic sectors, retaining a limited public-sector presence in the former while providing for privatisation or closure in the latter.

Scope and ownership approach

The policy covers existing Central Public Sector Enterprises (CPSEs), public-sector banks and public-sector insurance companies. Its organising principle is the strategic importance of an activity, rather than simply whether an enterprise makes profits or losses.

• The framework seeks to minimise the government's presence in commercial enterprises while preserving public ownership in identified strategic areas.
• Specified exclusions include certain not-for-profit enterprises and enterprises supporting vulnerable groups or performing developmental or promotional roles; the withdrawal framework is therefore not universal.

Strategic sectors: limited public ownership

The policy identifies four strategic sector groups in which a bare minimum public-sector presence is to be retained:

• The first group comprises atomic energy, space and defence.
• The second group comprises transport and telecommunications.
• The third group comprises power, petroleum, coal and other minerals.
• The fourth group comprises banking, insurance and financial services.
• Public-sector commercial enterprises are to be retained at the holding-company level in these strategic sectors.
• Other enterprises in strategic sectors may be privatised, merged, made subsidiaries of other public-sector enterprises, or closed.

Non-strategic sectors and the meaning of withdrawal

In non-strategic sectors, public-sector enterprises are to be considered for privatisation, where feasible; otherwise, they are to be considered for closure. Thus, the policy establishes a differentiated ownership framework, not an instruction to privatise every public enterprise.

• Privatisation entails transferring ownership and management control to private hands; a minority share sale that leaves government control intact does not by itself amount to privatisation.
• Mergers and subsidiarisation reorganise public ownership rather than necessarily transferring an enterprise to private ownership.
• Disinvestment proceeds are non-debt capital receipts in the Union Budget; they can help finance the fiscal deficit without creating a repayment liability, but they are not recurring tax revenue.