The Confederation of Indian Industry (CII) has presented a strong case for the government to adopt a faster and more predictable privatisation strategy for public sector enterprises (PSEs) in the upcoming Union Budget for 2026-27. The industry body emphasised that a clear, demand-driven roadmap is essential to unlock value from disinvestment, mobilise resources for critical capital expenditure, and navigate global economic uncertainties.
A Four-Pronged Strategy for Accelerated Disinvestment
In its detailed budget recommendations, CII proposed an accelerated four-pronged approach to privatisation. This strategy focuses on sectors where increased private participation can significantly boost efficiency, technology adoption, and global competitiveness. Simultaneously, it would allow the government to sustain its capital expenditure and meet key developmental priorities.
A central recommendation is for the Centre to announce a rolling three-year privatisation pipeline. This would clearly outline which public sector enterprises are likely to be taken up for disinvestment during that period. CII argued that full privatisation of all non-strategic PSEs is complex, and greater visibility on the government's plans would attract deeper investor interest, leading to better valuation and price discovery.
Phased Stake Reduction to Unlock Massive Value
CII outlined a pragmatic, phased approach for reducing the government's stake in listed PSEs. It suggested the government could first lower its holding to 51 per cent, allowing it to remain the single largest shareholder while releasing significant market value. Over time, this stake could be further reduced to between 26 and 33 per cent.
The potential financial impact is substantial. According to CII's analysis, reducing the government's stake to 51 per cent in 78 listed PSEs could unlock close to Rs 10 lakh crore. The proposed roadmap suggests targeting 55 PSEs where government holding is 75 per cent or less in the first two years, potentially mobilising around Rs 4.6 lakh crore. A subsequent stage could focus on 23 PSEs with higher government stakes, raising an additional Rs 5.4 lakh crore.
"A calibrated reduction of the government’s stake in listed PSEs to 51 per cent and even lower is a pragmatic step that balances strategic control with value creation," said CII Director General Chandrajit Banerjee. He added that unlocking nearly Rs 10 lakh crore of productive capital would provide vital resources to accelerate physical and social infrastructure development and support fiscal consolidation.
Shifting to a Demand-Based Approach and Institutional Framework
CII recommended a crucial shift from the current practice. Instead of identifying enterprises first and then inviting bids—a process that often stalls if valuation expectations aren't met—it proposed a demand-based model. This would involve gauging investor interest across a wider pool of enterprises first and then prioritising those with stronger demand, ensuring smoother execution and better price discovery.
To make the entire privatisation process more predictable and professionally managed, CII proposed setting up a dedicated institutional framework. This would comprise:
- A ministerial board for strategic guidance.
- An advisory board of industry and legal experts.
- A professional management team to handle execution, due diligence, market engagement, and regulatory coordination.
CII stated that strategic privatisation, supported by strong governance and regulation, can free up public resources for health, education, and green infrastructure while letting competitive markets drive efficiency. It urged faster implementation of the government's existing strategic disinvestment policy, which envisages an exit from all PSEs in non-strategic sectors.
Aligning the policy with the vision of a Viksit Bharat (Developed India), CII concluded that a forward-looking privatisation approach will enable the government to focus on its core functions while empowering the private sector to accelerate industrial transformation and job creation.
