Now PSUs or Govt Owned Organizations can Decide on Their Subsidiaries’ Disinvestment

Union Cabinet, chaired by Prime Minister Narendra Modi, approved the proposal for empowering the boards of state-owned companies to decide on the closure and divestment of their units or subsidiaries.

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The proposal intends to reform the functioning of PSEs, by allowing greater autonomy to the Board of Directors of the Holding PSEs for taking decisions and recommend for timely existing from their investment in subsidiaries, units or JVs, which will enable them to monetise their investment in such subsidiaries, units, JVs at an opportune time or close their loss-making and inefficient subsidiaries, unit, JV at right opportunity, the government said in a statement on Wednesday.

This will result in expeditious decision making and saving of wasteful operational and financial expenditure by the PSEs, the statement added.

Presently, the Board of Directors of holding or parent public sector enterprises have been delegated certain powers to make equity investments to establish financial joint ventures and wholly-owned subsidiaries and undertake mergers or acquisitions, subject to certain ceilings of net worth.

However, the Boards of Directors of Public Sector Enterprises (PSEs) do not have powers for disinvestment or closure of their subsidiaries or units or stake in Joint Ventures, except for some limited powers given to Maharatna PSEs for minority stake disinvestment in their subsidiaries. Therefore, approval of the Cabinet was needed for both strategic disinvestment and minority stake sale or closure of the subsidiaries or units or sale of their stakes in a joint venture, irrespective of the size of operations or capital deployed of such subsidiaries.

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