Budget 2026: CII Advocates for Demand-Driven, Accelerated Privatization of Public Sector Enterprises
The Confederation of Indian Industry (CII) has urged the government to adopt a more rapid and demand-driven approach to the privatisation of public sector enterprises (PSEs) in the upcoming Union Budget for 2026-27. The industry body emphasizes the need for a clear and predictable roadmap to unlock value through disinvestment, which could help mobilize resources for capital expenditure amid ongoing global economic challenges. CII’s proposals include a four-pronged strategy aimed at enhancing efficiency and competitiveness in sectors where private participation is beneficial.
Accelerated Privatisation Strategy
CII has proposed an accelerated privatisation strategy that focuses on sectors where private involvement can significantly enhance operational efficiency and technology adoption. The industry body suggests that the government should announce a rolling three-year privatisation pipeline, detailing which enterprises will be targeted for disinvestment during this period. This approach aims to provide greater visibility to potential investors, which could lead to improved valuation and price discovery for the PSEs involved. CII acknowledges that fully privatising all non-strategic PSEs is a complex and time-consuming process, and a clearer roadmap could attract deeper investor participation.
The CII’s analysis indicates that reducing the government’s stake in listed PSEs to 51% could unlock approximately Rs 10 lakh crore in capital. The initial phase of disinvestment could focus on 55 PSEs where the government’s holding is 75% or less, potentially mobilizing around Rs 4.6 lakh crore. In the subsequent phase, 23 PSEs with higher government stakes could be targeted, which may raise an additional Rs 5.4 lakh crore. This phased approach is designed to balance strategic control with the need for value creation in the market.
Balancing Control and Value Creation
CII Director General Chandrajit Banerjee highlighted that a calibrated reduction of the government’s stake in listed PSEs is a pragmatic step that can facilitate both strategic control and value creation. By unlocking nearly Rs 10 lakh crore of productive capital, the government could significantly enhance its resources for developing physical and social infrastructure, while also supporting fiscal consolidation efforts. CII believes that strategic privatisation, coupled with robust governance and regulatory frameworks, can free up public resources for essential sectors such as health, education, and green infrastructure.
The industry body also pointed out that competitive markets drive efficiency and innovation, which are crucial for India’s growth. A forward-looking privatisation policy aligned with the vision of Viksit Bharat (Developed India) will enable the government to concentrate on its core functions while empowering the private sector to foster industrial transformation and job creation.
Demand-Driven Approach to Disinvestment
In its recommendations, CII has called for a shift towards a demand-driven approach for privatisation. The current method of identifying enterprises first and then inviting bids often leads to stalled processes if valuation expectations are not met. Instead, CII suggests gauging investor interest across a broader range of enterprises before prioritizing those with stronger demand. This approach is expected to facilitate smoother execution and better price discovery, while structured feedback from investors could help address procedural and regulatory challenges.
CII has also proposed the establishment of a dedicated institutional framework to make the privatisation process more predictable and professionally managed. This framework would include a ministerial board for strategic guidance, an advisory board comprising industry and legal experts, and a professional management team responsible for execution, due diligence, market engagement, and regulatory coordination. Such measures aim to enhance the efficiency and effectiveness of the privatisation process, ultimately benefiting the economy as a whole.
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