Cabinet empowers boards of PSEs to decide on closure, divestment of units/subsidiaries

The Union Cabinet on Wednesday approved the proposal to empower the board of directors of the holding public sector enterprises to recommend and carry out the process of disinvestment (both strategic disinvestment and minority stake sale) or closure of any of their subsidiaries/units/stake in joint ventures.

The board of holding or parent PSEs under the Maharatna, Navratna, and Miniratna categorieshave been delegated certain powers to make equity investments, establish financial joint ventures and wholly-owned subsidiaries, and participate in mergers and acquisitions, subject to certain net-worth ceilings.

However, the Boards do not have powers for disinvestment or closure of their subsidiaries or units or stake in JVs, except for some limited powers given to Maharatna PSEs for minority stake disinvestment in their subsidiaries.


Further delegation in this regard has been provided by this decision, in accordance with the spirit of the new PSE policy, 2021, to reduce the presence of Government PSEs and for requirement specification.

The process for PSEs to carry out strategic disinvestment transactions/closures should be fair, based on competitive bidding principles, and consistent with the guiding principles to be created, the government said in a press release.

The plan is aimed at reforming the functioning of PSEs by granting the boards of the holding PSEs as much autonomy in making decisions and suggesting timely exits from their investments in subsidiaries. This will allow them to monetise their investments in such subsidiaries at the right time or close their loss-making and inefficient subsidiaries, the government said.