Parliamentary Panel Urges Immediate Implementation of New Public Sector Enterprise Policy for Fiscal Prudence

A parliamentary committee has stressed the urgent need to implement the new Public Sector Enterprise (PSE) Policy to achieve fiscal prudence. The policy aims to privatise or close loss-making public sector undertakings (PSUs) in non-strategic sectors. Despite its introduction, progress has been slow, with no disinvestment proposals approved since the guidelines were issued in December 2021, according to the Standing Committee on Finance.

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The New PSE Policy for Atmanirbhar Bharat, approved by the Cabinet on February 4, 2021, seeks to reduce government involvement in PSEs across all economic sectors. It outlines four strategic sectors based on national security, energy security, critical infrastructure, financial services provision, and important minerals availability. In these sectors, only a minimal government presence at the holding company level will be retained.

Strategic Sectors and Disinvestment

In strategic sectors, existing public sector commercial enterprises will remain under government control at a minimal level. Other entities will be considered for privatisation, merger, subsidiarisation with another PSE, or closure. The policy represents a significant shift towards fiscal prudence but has yet to yield substantial results.

The committee, led by BJP leader Bhartruhari Mahtab, noted that while disinvestment is an ongoing process influenced by factors like investor interest and market conditions, the lack of progress indicates a disconnect between policy goals and execution. The action taken report highlights this gap.

Recommendations for Accelerating Reforms

The committee recommended taking concrete steps to speed up achieving fiscal prudence and efficient public resource allocation. It also suggested reviewing incentive packages offered to states for state-level PSU reforms to make them more attractive and encourage greater state participation in the reform process.

The New PSE Policy's goal is to promote fiscal discipline and efficient resource use. However, since its notification in February 2021, no significant advancements have been made in disinvesting non-strategic CPSEs. The policy's success depends on bridging the gap between its intent and practical implementation.

Overall, the committee emphasised that while external factors affect disinvestment processes, proactive measures are necessary to realise the policy's objectives effectively. Enhancing state incentives could play a crucial role in facilitating broader reform participation.

With inputs from PTI