What is the CII's proposed four-pronged strategy for accelerating PSU privatisation in India?

The Confederation of Indian Industry (CII) has proposed a four-pronged strategy aimed at unlocking value from the disinvestment of public sector enterprises (PSEs) and ensuring efficient execution. The strategy includes: Demand-driven approach: Instead of the government identifying PSEs for sale and then seeking investors, it should first gauge investor interest and prioritise enterprises with stronger demand and valuation expectations. Predictable roadmap: Announcing a rolling three-year privatisation pipeline to provide transparency and facilitate deeper investor engagement. Phased stake reduction: Reducing government ownership gradually, for instance, from 75% to 51%, and eventually down to 33–26%, balancing strategic control with value creation. Institutional framework: Establishing a dedicated body with a ministerial board, advisory board, and professional management team to oversee execution, due diligence, market engagement, and regulatory coordination. This strategy aims to maximise value realisation, improve investor confidence, and accelerate the privatisation process while maintaining strategic control over critical sectors.

Why does the CII advocate a demand-driven approach for PSU disinvestment rather than the current method?

The CII advocates a demand-driven approach because the current sequence—where the government selects PSEs and then invites investor interest—often results in stalled transactions when valuations are not met. By first assessing investor demand across a broader set of enterprises, the government can: Prioritise PSEs with strong market interest, ensuring smoother execution and better price discovery. Reduce delays and procedural bottlenecks, making the privatisation process more predictable and transparent. Facilitate structured feedback from investors to refine regulatory frameworks, governance, and valuation methods. For example, CII notes that reversing the sequence would have allowed early identification of PSEs likely to attract substantial investor participation, potentially unlocking close to ₹10 lakh crore in value while ensuring government retains strategic control where needed.

How can phased reduction of government stakes in PSEs balance strategic control with value creation?

Phased stake reduction allows the government to maintain control over strategic sectors while unlocking economic value from listed PSEs. The proposed approach includes: Reducing stakes in 78 listed PSEs to 51% initially, keeping the government as the single largest shareholder. Gradually lowering stakes to between 33% and 26% over time, depending on investor response and market conditions. Focusing early-stage disinvestment on enterprises where government ownership is 75% or less to mobilise immediate capital (estimated ₹4.6 lakh crore). This method creates a balance between strategic oversight and market-driven efficiency , enabling the government to fund infrastructure, social development, and fiscal consolidation while inviting private enterprise to improve operational performance. For example, partial disinvestment in PSEs like Coal India and LIC could release capital while maintaining sufficient government control to safeguard national interests.

What are the reasons for establishing a dedicated institutional framework to manage PSU privatisation?

The CII recommends creating an institutional framework to professionalise and streamline the privatisation process. Key reasons include: Accountability and oversight: A dedicated body with a ministerial board ensures clear ownership of decisions, reducing ad hoc policy interventions. Expert guidance: An advisory board of industry and legal experts can independently benchmark PSE valuations, suggest governance improvements, and address investor concerns. Professional execution: A management team handles due diligence, market engagement, regulatory compliance, and post-privatisation monitoring, reducing procedural delays and enhancing investor confidence. Such a framework ensures continuity, transparency, and efficiency. A comparable example is Singapore’s Temasek Holdings, which manages state-owned enterprises professionally while maintaining government oversight, leading to both profitability and strategic alignment.

Critically analyse the potential benefits and risks of the CII’s proposed accelerated privatisation roadmap.

The accelerated privatisation roadmap has several potential benefits: Capital mobilisation: Unlocking nearly ₹10 lakh crore could fund infrastructure projects, health, education, and social development. Efficiency gains: Private participation can enhance productivity, technology adoption, and competitiveness in formerly state-run enterprises. Market confidence: A predictable, demand-driven process improves investor trust and ensures better valuation of assets. However, risks include: Strategic control concerns: Reducing stakes in certain PSEs too quickly may compromise national security or public interest in sensitive sectors. Implementation challenges: Phased reduction and institutional oversight require careful coordination to prevent delays or mismanagement. Socio-economic impact: Job losses or labour unrest in certain PSEs could arise from operational restructuring under private ownership. Thus, while the roadmap offers significant economic and developmental advantages, it must be complemented with robust regulatory frameworks, stakeholder consultation, and safeguards for strategic sectors and employees.

Can you provide examples of how strategic privatisation has unlocked value and improved efficiency in Indian PSEs?

Several Indian PSEs have demonstrated the benefits of strategic privatisation or disinvestment: Maruti Suzuki: Originally a government-majority company, gradual privatisation and partnership with Suzuki improved operational efficiency, technology adoption, and global competitiveness. LIC IPO: Partial disinvestment allowed market-based valuation, raised capital for the government, and introduced governance reforms. BPCL and IDBI Bank: Strategic stake reduction and market engagement have attracted private investment while retaining government oversight, enhancing performance. These examples illustrate that when privatisation is carefully structured, with phased divestment and professional oversight, it can simultaneously unlock capital, improve governance, and maintain strategic interests.

Consider a scenario where a three-year rolling privatisation pipeline is not announced. What challenges could arise in PSU disinvestment?

Without a transparent rolling privatisation pipeline, several challenges could arise: Investor uncertainty: Lack of visibility on which PSEs will be disinvested can reduce market participation, delay transactions, and limit price discovery. Valuation inefficiency: When investors are not consulted beforehand, the government may set unrealistic prices, leading to stalled sales or undervaluation of assets. Operational delays: Ad hoc privatisation without a structured roadmap may result in bureaucratic bottlenecks, regulatory hurdles, and inefficient execution. For instance, in previous disinvestment attempts, investor hesitation due to unclear policy timelines has delayed the sale of several PSEs, highlighting the importance of a predictable and professionally managed privatisation strategy. A rolling pipeline would mitigate these issues and enhance both investor confidence and fiscal outcomes.

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Demand-Led PSE Privatisation and the Case for a Clear Roadmap

CII proposes a faster, predictable disinvestment pipeline to unlock value, boost efficiency and fund development priorities

Surya

•January 12, 2026•5 mins read

CII urges strategic PSU privatisation to unlock ₹10 lakh crore value

Public sector enterprise (PSE) privatisation has re-emerged as a key fiscal and governance tool amid rising developmental needs and global economic uncertainty. The Confederation of Indian Industry (CII), in its proposals for the Union Budget 2026–27, has argued that disinvestment must move faster and become more predictable. The article...

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Demand-Led PSE Privatisation and the Case for a Clear Roadmap

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