Budget: CII suggests expedited, demand-led approach for privatisation of public sector enterprises

Industry lobby CII has suggested an accelerated four-pronged strategy to unlock value from the disinvestment of public sector enterprises, calling for a demand-driven approach in selecting units for privatisation and following a predictable roadmap.

In its proposals for the Union Budget 2026-27, CII urged the government to mobilise resources through a calibrated approach to privatisation, focusing on sectors where private participation can enhance efficiency, technology infusion, and global competitiveness, to sustain capital expenditure and address developmental priorities amid global economic uncertainties.

The Confederation of Indian Industry (CII) called upon the Centre to announce a rolling three-year privatisation pipeline, outlining which enterprises are likely to be taken up for privatisation during this period, recognising that full privatisation of all non-strategic PSEs is a complex and time-consuming process.

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It argued that this visibility would encourage deeper investor engagement and more realistic valuation and price discovery, which would contribute towards expediting the privatisation process.

"Government could reduce its stake in listed PSEs in a phased manner to 51% initially, allowing it to remain the single largest shareholder while releasing significant value into the market. Over time, this stake could be brought down further to between 33 and 26%,” CII stated.

According to its analysis, reducing the government’s stake to 51₹ in 78 listed PSEs could unlock close to Rs 10 lakh crore.

In the first two years of the roadmap, the disinvestment strategy could target 55 PSEs where the government holds 75₹ or less, mobilising around ₹4.6 lakh crore.

In the subsequent stage, 23 PSEs with higher government stakes (over 75%) could be disinvested, potentially bringing in ₹5.4 lakh crore, it said.

”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. Unlocking nearly ₹10 lakh crore of productive capital would provide vital resources to accelerate physical and social infrastructure development and support fiscal consolidation,” said CII Director General Chandrajit Banerjee.

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The industry lobby believes that by focusing on governance, regulation, and enabling infrastructure while allowing competitive markets to drive efficiency, strategic privatisation can unlock public resources for high-impact areas such as health, education and green infrastructure.

"India’s growth story is increasingly being powered by private enterprise and innovation. A forward-looking privatisation policy, aligned with the vision of Viksit Bharat, will enable the government to focus on its core functions while empowering the private sector to accelerate industrial transformation and job creation,” it said.

CII suggested accelerating the implementation of the government’s strategic disinvestment policy, which envisions an exit from all Public Sector Enterprises (PSEs) in non-strategic sectors and a minimal presence in strategic ones.

Recommending a shift to a demand-based approach in selecting PSEs for privatisation, the industry lobby said, presently, the government identifies specific enterprises for sale and subsequently invites investor interest. However, when sufficient demand or valuation is not achieved, the process often stalls.

CII suggested reversing this sequence by first gauging investor interest across a broader set of enterprises and then prioritising those that attract stronger interest and meet valuation expectations.

Such an approach, it believes, would ensure smoother execution and better price discovery. Structured feedback from potential investors could also help address procedural or regulatory bottlenecks.

It also recommended an institutional framework to strengthen oversight, accountability, and investor confidence, making privatisation predictable and professionally managed.

It called for the establishment of a dedicated body with a ministerial board for strategic guidance, an advisory board of industry and legal experts for independent benchmarking, and a professional management team to handle execution, due diligence, market engagement, and regulatory coordination.

This structure would also monitor market developments, stakeholder feedback, and post-privatisation performance to enable continuous improvement.