Disinvestment and Privatisation — PSU Classification, DIPAM, Major Disinvestments, Air India, LIC IPO
Complete study notes on disinvestment and privatisation in India covering Maharatna, Navratna, Miniratna PSUs, DIPAM, strategic sales, Air India, and LIC IPO for Kerala PSC.
Complete study notes on disinvestment and privatisation in India covering Maharatna, Navratna, Miniratna PSUs, DIPAM, strategic sales, Air India, and LIC IPO for Kerala PSC.
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Disinvestment and privatisation of Public Sector Undertakings (PSUs) is a frequently tested topic in Kerala PSC exams. This note covers PSU classification, disinvestment policy, major sales, and recent developments.
Key Definitions
| Term | Meaning |
|---|---|
| Public Sector Undertaking (PSU) | Company where government holds 51%+ equity (or effective management control) |
| Disinvestment | Government selling part of its stake in a PSU (but retaining management control) |
| Privatisation | Government selling majority stake (51%+) and transferring management control to private buyer |
| Strategic Disinvestment | Sale of substantial portion of equity along with transfer of management control |
| CPSE | Central Public Sector Enterprise — PSU under Central Government |
Department of Investment and Public Asset Management (DIPAM)
| Aspect | Detail |
|---|---|
| Under | Ministry of Finance |
| Established | 1999 (as Department of Disinvestment); renamed DIPAM in 2016 |
| Function | Manages disinvestment of government equity in CPSEs |
| Methods used | OFS (Offer for Sale), IPO, buyback, strategic sale, ETF (Bharat 22, CPSE ETF) |
Classification of CPSEs
By Maharatna / Navratna / Miniratna Status
The government grants special autonomy to well-performing CPSEs in tiers:
Maharatna CPSEs (as of 2025)
| Criteria | Requirement |
|---|---|
| Must already be Navratna | Yes |
| Annual turnover | Rs 25,000 crore+ (3-year average) |
| Net worth | Rs 15,000 crore+ |
| Annual net profit | Rs 5,000 crore+ (3-year average) |
| Global presence | Significant international operations |
| No. | Company | Sector |
|---|---|---|
| 1 | Bharat Heavy Electricals Ltd (BHEL) | Power equipment |
| 2 | Bharat Petroleum Corporation Ltd (BPCL) | Oil refining |
| 3 | Coal India Ltd (CIL) | Mining |
| 4 | GAIL (India) Ltd | Natural gas |
| 5 | Hindustan Petroleum Corp Ltd (HPCL) | Oil refining |
| 6 | Indian Oil Corporation (IOC) | Oil refining |
| 7 | NTPC Ltd | Power generation |
| 8 | Oil and Natural Gas Corp (ONGC) | Oil exploration |
| 9 | Power Grid Corporation | Power transmission |
| 10 | Steel Authority of India (SAIL) | Steel |
| 11 | Indian Railway Finance Corporation (IRFC) | Railway financing |
| 12 | Rural Electrification Corporation (REC) | Rural power financing |
| 13 | Power Finance Corporation (PFC) | Power financing |
| 14 | Oil India Ltd | Oil exploration |
Total: 14 Maharatna CPSEs (as of 2025, number may change)
Navratna CPSEs
| Criteria | Requirement |
|---|---|
| Must already be Miniratna-I or Schedule A | Yes |
| Score of 60+ on 6 parameters | Net profit, net worth, turnover, return on capital, manpower cost to turnover, PBDIT to turnover |
| No. | Company | Sector |
|---|---|---|
| 1 | Container Corporation (CONCOR) | Logistics |
| 2 | Engineers India Ltd (EIL) | Consultancy |
| 3 | Hindustan Aeronautics Ltd (HAL) | Defence |
| 4 | Mahanagar Telephone Nigam (MTNL) | Telecom |
| 5 | National Aluminium Co (NALCO) | Aluminium |
| 6 | NBCC (India) Ltd | Construction |
| 7 | Neyveli Lignite Corporation (NLC India) | Power/Mining |
| 8 | Rashtriya Ispat Nigam (RINL) | Steel |
| 9 | Shipping Corporation of India (SCI) | Shipping |
Note: List changes as companies get upgraded to Maharatna or new ones added.
Miniratna CPSEs
Category I: Made profit in 3 of the last 5 years; positive net worth. Category II: Made profit in the last 3 years continuously; positive net worth.
| Selected Miniratna-I | Sector |
|---|---|
| Airport Authority of India (AAI) | Airports |
| Balmer Lawrie | Logistics/Travel |
| Bharat Electronics (BEL) | Defence electronics |
| Central Warehousing Corporation | Storage |
| Cochin Shipyard | Shipbuilding |
| Garden Reach Shipbuilders | Shipbuilding |
| Hindustan Copper | Mining |
| Indian Railway Catering and Tourism (IRCTC) | Railway services |
| KIOCL | Iron ore |
| Mazagon Dock Shipbuilders | Defence/Shipbuilding |
| NHPC | Hydro power |
| Pawan Hans | Helicopter services |
| Railtel Corporation | Telecom |
| RITES | Transport consultancy |
Autonomy Powers by Category
| Feature | Maharatna | Navratna | Miniratna-I | Miniratna-II |
|---|---|---|---|---|
| Investment limit (single project) | Rs 5,000 crore | Rs 1,000 crore | Rs 500 crore | Rs 300 crore |
| Joint ventures/subsidiaries | Up to 15% of net worth (max Rs 5,000 cr) | Up to 15% of net worth (max Rs 1,000 cr) | Up to Rs 500 cr | Up to Rs 250 cr |
| Board-level autonomy | Full | Significant | Moderate | Limited |
History of Disinvestment in India
| Period | Policy | Key Actions |
|---|---|---|
| 1991-92 | New Economic Policy (NEP) | First disinvestment — minority stake sales in PSUs |
| 1996 | Disinvestment Commission | Headed by G.V. Ramakrishna; recommended strategic sales |
| 1999-2004 | Strategic Sale Era (NDA-I) | Department of Disinvestment created (1999); major sales: BALCO, CMC, IPCL, Maruti, VSNL |
| 2004-2014 | UPA Period | Mostly OFS route; minority stake sales; limited strategic sales |
| 2014 onwards | NDA-II and III | DIPAM renamed (2016); New PSE Policy (2021); Air India sale; LIC IPO |
| 2021 | New Public Sector Enterprise Policy | Classified sectors as Strategic (bare minimum CPSEs) and Non-Strategic (privatise/merge/close) |
Major Disinvestments and Privatisations
| PSU | Year | Buyer | Type | Amount |
|---|---|---|---|---|
| Maruti Udyog | 2003 | Suzuki Motor | Strategic sale | Rs 1,000 cr |
| BALCO | 2001 | Sterlite Industries | 51% strategic sale | Rs 551 cr |
| VSNL | 2002 | Tata Group | Strategic sale | Rs 1,439 cr |
| Hindustan Zinc | 2002 | Sterlite (Vedanta) | 26% stake | Rs 445 cr |
| IPCL | 2002 | Reliance Industries | Strategic sale | Rs 1,490 cr |
| CMC Ltd | 2001 | TCS | Strategic sale | Rs 152 cr |
| Air India | 2022 | Tata Group (Talace Pvt Ltd) | 100% strategic sale | Rs 18,000 cr (includes debt) |
| BPCL | Proposed | — | Strategic sale (pending as of 2025) | — |
| Shipping Corporation | Proposed | — | Strategic sale (pending) | — |
Air India Privatisation (2022)
| Aspect | Detail |
|---|---|
| Sold to | Tata Group (Talace Pvt Ltd, subsidiary of Tata Sons) |
| Date | January 27, 2022 (formal handover) |
| Government stake sold | 100% |
| Enterprise value | Rs 18,000 crore (Rs 2,700 cr cash + Rs 15,300 cr debt takeover) |
| Original nationalisation | 1953 (Air India was originally Tata Airlines, founded 1932) |
| Significance | Largest privatisation in Indian history; came back to Tata after ~69 years |
LIC IPO (2022)
| Aspect | Detail |
|---|---|
| Date | May 2022 |
| Government stake sold | 3.5% |
| IPO size | Rs 21,000 crore (India’s largest IPO at the time) |
| LIC remains | Government still holds ~96.5% |
| Listing | BSE and NSE |
| Issue price | Rs 949 per share |
| Type | Not privatisation — only minority disinvestment via IPO |
CPSE Exchange Traded Fund (ETF)
| Feature | Detail |
|---|---|
| Launched | 2014 |
| Managed by | Nippon India Mutual Fund (earlier Reliance MF) |
| Contains | Basket of 12 CPSE stocks |
| Purpose | Indirect disinvestment — government sells units |
| Bharat 22 ETF | Launched 2017; basket of 22 stocks (CPSEs + PSBs + UTI) |
New Public Sector Enterprise (PSE) Policy 2021
| Feature | Detail |
|---|---|
| Announced by | Finance Minister (Budget 2021-22) |
| Strategic sectors (4) | Atomic energy/defence/space, Transport and Telecom, Power/Petroleum/Coal/Minerals, Banking/Insurance/Financial services |
| In strategic sectors | Bare minimum CPSEs retained (1-4); rest privatised/merged/closed |
| Non-strategic sectors | All CPSEs to be privatised/closed |
| Goal | Reduce government footprint in business |
Disinvestment vs Privatisation — Key Difference
| Feature | Disinvestment | Privatisation |
|---|---|---|
| Stake sold | Minority (government retains 51%+) | Majority (51%+) |
| Management control | Retained by government | Transferred to private buyer |
| Examples | LIC IPO (3.5%), Coal India OFS | Air India (100%), BALCO (51%) |
| Also called | — | Strategic disinvestment (when government-initiated) |
Kerala Connection
| PSU | Kerala Link |
|---|---|
| Cochin Shipyard Ltd (CSL) | Miniratna-I; located in Kochi; built India’s first indigenous aircraft carrier INS Vikrant |
| FACT (Fertilisers and Chemicals Travancore) | Kochi; India’s first large-scale fertiliser plant (1947) |
| HLL Lifecare (formerly HLL) | Thiruvananthapuram; healthcare products |
| Cochin Port Authority | Major port |
| BPCL Kochi Refinery | One of largest refineries in India |
| IRFC, IRCTC, Railtel | National PSUs with operations in Kerala |
Frequently Asked PSC Questions
Q1. What is the difference between disinvestment and privatisation? Ans: Disinvestment is selling minority stake (government retains control); Privatisation is selling majority stake with transfer of management control
Q2. What is DIPAM? Ans: Department of Investment and Public Asset Management under Ministry of Finance; manages government disinvestment
Q3. How many Maharatna CPSEs are there? Ans: 14 (as of 2025)
Q4. Who bought Air India in 2022? Ans: Tata Group (Talace Pvt Ltd, subsidiary of Tata Sons)
Q5. What was the original name of Air India? Ans: Tata Airlines (founded by J.R.D. Tata in 1932)
Q6. What was the size of the LIC IPO? Ans: Approximately Rs 21,000 crore (May 2022)
Q7. What is the minimum criteria for Maharatna status? Ans: Must be Navratna + Rs 25,000 cr turnover + Rs 15,000 cr net worth + Rs 5,000 cr net profit (3-year averages)
Q8. Under the New PSE Policy 2021, how many strategic sectors are identified? Ans: 4 (Atomic energy/defence/space, Transport/Telecom, Power/Petroleum/Coal/Minerals, Banking/Insurance/Financial services)
Q9. Which Miniratna CPSE is based in Kochi? Ans: Cochin Shipyard Ltd
Q10. What is the CPSE ETF? Ans: An Exchange Traded Fund containing a basket of CPSE stocks, used as an indirect disinvestment tool
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