Disinvestment procedure

The government of India is carrying out disinvestment (www.divest.nic.in) in accordance with the prescribed procedure that ensures complete transparency. The procedure is reviewed from time to time and modified with a view to accelerating the process further. At present it is as follows:

Proposals for disinvestment in any public sector undertaking (PSU), based on the recommendations of the disinvestment commission or in accordance with the declared Disinvestment Policy of the government, are placed for consideration of the Cabinet Committee on Disinvestment (CCD). After CCD clears the disinvestment proposals, the selection of advisor is done through a competitive bidding process.

The advisor assists the government in preparation and issue of advertisement in leading newspapers inviting expressions of interest (EOI) from interested parties. After receipt of the EOIs, prospective bidders are short-listed, based on predetermined objective screening criteria or requirements.

The advisor, after due diligence of the PSU, prepares the information memorandum in consultation with the concerned PSU. This is given to the short-listed prospective bidders who have entered into a confidentiality agreement. The draft share purchase agreement and shareholders’ agreement are also prepared by the advisors with the help of a legal advisor.

The prospective bidders undertake due diligence of the PSU and hold discussions with the advisors, the government and the representatives of the PSU for any clarifications. Concurrently, the task of valuation of the PSU is undertaken in accordance with the standard national and international practices.

Based on the reactions received from the prospective bidders, the share purchase agreement and shareholders’ agreement are finalised. These are then vetted by the ministry of law and are approved by the government. Thereafter, these are sent to the prospective bidders for inviting the final binding bids (technical and financial).

The bids received, as above, are examined, analysed and evaluated by the inter-ministerial group (IMG), and IMG’s recommendations are placed before the CCD for the final approval of the bids, the strategic partner, share purchase agreement and shareholders’ agreement, and other ancillary issues.

In the disinvestment process mentioned above, the department of disinvestment is assisted at each stage by an IMG, comprising officers from the ministry of finance, the department of public enterprises, the administrative ministry and the department controlling the PSU, apart from the officers of the department of disinvestment and the advisors.

After the transaction is completed, all papers and documents relating to it are to be turned over to the comptroller and auditor general of India (CAG), to enable the CAG to undertake an evaluation of the disinvestment, for placing it in Parliament and releasing it to the public.