Department of Investment and Public Asset Management (DIPAM) | SBI PO Prelims & Mains Preparation - Bank Exams PDF Download

Introduction

Need for DIPAM

• Highly stressed PSUs 
• Inefficient management structure in loss making PSUs 
• Increase in loss making PSUs 
• Rapidly rising non performing assets of Banks 
• NITI Aayog has identified 74 loss making PSUs 
• Among these 8 PSUs are identified to be closed this fiscal according to Union budget 2016 - 2017

Purpose of DIPAM

• Proper management of Government investments in equity 
• Divestment in Central Public Sector Undertakings (CPSUs) 
• To advise government on financial restructuring matters of CPSUs 
• To attract investment through capital markets 
• To address issues of capital restructuring, bonus shares, dividend etc in CPSUs

Background

• NDA government (1999 – 2004) was aggressive in divestment and privatizing loss making PSUs 
• NDA earlier privatized more than a dozen companies 
• UPA government buried this divestment regime in their rule 
• Now, BJP is aiming to revive divestment again through DIPAM 

Earlier Divested PSUs

• Some of the divested PSUs during the Atal Bihari Vajpayee led NDA government include 
• Videsh Sanchar Nigam Limited (VSNL) 
• Bharat Aluminium Company (BALCO) 
• CMC Ltd 
• HZL (Hindusthan Zinc Ltd) 
• Hotels

DIPAM Functioning

• DIPAM will function under the finance ministry of India 
• Head Quarters located in Delhi 
• DIPAM will deal with the sale or divestment of equity in CPSUs 
• DIPAM will manage government investments in equity 
• DIPAM uses Open For Sale (OFS), private placement, stake sale, strategic sale etc to divest CPSUs 
• All divestments to be handled by DIPAM or on the advice of DIPAM by the concerned ministry 

DIPAM Progress

• “Invest India” was the official agency for promotion of investment in India 
• Main aim is to provide facilities for investment in India 
• This is to be merged with DIPAM 
• DIPAM works closely with “Make In India” and predicted to be first and foremost place for investors 
• The experts and DIPAM team will provide the potential investors with the various opportunities existing in various sectors 
• It will guide the investors from incubation to establishment and after care services 
• DIPAM expedites regulatory provisions and approvals 
• DIPAM will carry out privatization of PSUs in due course by transforming the poor or loss making PSUs as infrastructure to new potential investors through “Make In India’ 

Current Implications

• NITI Aayog sell off 8 loss making PSUs for 56500 crore through Divestment 
• Among this, 20500 crore to be divested through strategic sale 
• Rest 30000 crore to be divested through stake sale 
• DIPAM to garner more than 16000 crore by November end through share buy backs and offer for sale (OFS) route of Divestment 
• PSUs involved in Share buy back include NALCO, NMDC, Coal India, MOIL and Bharat Electronics accounting to 13500 crore 
• NHPC Stake sale amounting to 3350 crore 
• NTPC and IOC carry out Divestment through employee subscriptions 
• SBI merger with its associate banks and Bharatiya Mahila Bank on share swap ratio basis approval on August 18, 2016