The experience suggests that fiscal convenience was the prime mover of such disinvestments.
Disinvestment has emerged as one of the most revolutionary innovations in economic policy of almost all countries of the world.
The Government started to deregulate the areas of its operation and subsequently the disinvestment in public sector enterprises was announced.
Disinvestment would have a beneficial effect on the capital market; the increase in floating stock would give the market more depth and liquidity, give investors easier exist option, help in establishing more accurate benchmarks for valuation and pricing, and facilitate raising of funds by the privatized companies for their projects or expansion, in future.
of the proposed equity, it is expected that the market capitalisation of NTPC would be higher and it would help the company to raise resources in the international market on competitive terms.
Summary: After several deaths and rebirths, disinvestment is back as a big-ticket reform.
With the size of the fiscal deficit threatening the continuation of the fiscal stimulus, disinvestment offers a way of keeping the demand stimulus alive without having to pay for it from the exchequer's pocket-either in the form of lower taxes or through higher spending.
Much of this has happened in the past too, but not through an organised, methodical and well-stated approach-which is what the new disinvestment plan promises to be.
Of all the economic reforms measures taken since 1991, disinvestment deserves the most distinguished mention on one account-it has had the maximum number of deaths and rebirths in the intervening 20-odd years.
This generally was not the case for the South African disinvestments, especially after 1984 and 1985.
The announcement of disinvestment for the most part causes those prohibitions to disappear, and one can conjecture that the actual or potential renewal of investment in these firms is enough to give their returns a boost.
Yet, if market segmentation actually exists such that the sale or abandonment of investments and operations in South Africa leads to increased, positive trading activity in the shares of the disinvesting firm, then a rationale for the existence of a positive effect at the announcement of disinvestment is that announcement is seen as a "trigger" leading to increased future investment in the shares of these firms, particularly by large institutional investors such as public pension funds that had been restricted by divestment rules.