Among other responsibilities of PSE's post-independence, the social and developmental obligations of the nation were most important, which resulted in these units escaping competitive race.
Further, the public enterprises were used as tools for political and bureaucratic manipulation; which was consequential in low capacity utilization, reduced productivity, failure to innovate, and complex decision-making processes on vital issues of development.
Further, disappointing performance by the industrial sector and Balance of Payment crisis of 1991 forced the policymakers to reassess the situation and program reforms towards a further open-market oriented policy.
The mandate of DIPAM is as follows: All other post disinvestment matters, including those relating to and arising out of the exercise of Call option by the Strategic Partner in the erstwhile Central Public Sector Undertakings, shall continue to be handled by the administrative Ministry or Department concerned, where necessary, in consultation with the Department of Investment and Public Asset Management (DIPAM).
[5]The policy on disinvestment has evolved considerably through President's address to Joint Sessions of Parliament and statement of the Finance Minister's in their Budget Speeches.
[8] Further, the budgetary provisions for the PSUs were sharply curtailed and most of the loss-making enterprises were referred to the Board of Industrial and Financial Reconstruction.
The new method used by the government was, classifying the PSUs in two categories: ‘'Strategic'’ and ‘'Non-Strategic'’; all the industries dealing with defense-related equipment were described as strategic resources and no disinvestments were recommended for these sectors.
some of the excerpts of (NCMP) declared: No profit-making enterprises shall be privatized, all Navratna companies shall be retained and encouraged to mobilize resources through the capital market, attempts shall be carried out to strengthen all loss-making PSUs and chronically sick-industries shall be sold off, duly compensating the work-force, all the revenue generated from privatization shall be used for selected social sector schemes.
The UPA government in first among many other decisions taken discontinued the process of the "Strategic sale" policy of earlier National Democratic Alliance; and particularly minority stake was auctioned in some PSUs.
Further, through his research, the author has found that, whenever there was a transfer of ownership in any PSEs' to private entities through disinvestment, the economic efficiency of the relevant enterprise was improved.
[17] Some analysts have observed, the reason for not implementing the disinvestment policy to the core was because of a lack of a clear majority of the Congress party in the Lok Sabha after the 2004 general elections.