Disinvestment in India - a Stakeholders' Management Perspective

India, after independence, adopted mixed economy, aiming socialistic patter, through heavy investment in the public sector enterprises (PSE). Increasingly, PSE's activities were extended to non-infrastructural, non-core, and non-strategic activities. This expansion necessitated a rapid expansion of public sector agencies, which later became a matter of concern. Therefore, government of India (GOI) started reform programs to reduce the size and expenditure of the PSEs through restructuring. In the 1980s, PSEs performance was less than satisfactory and its growth had become an end in itself, absorbing half of the total industrial investment regardless of the low return obtained. The GOI in 1991 initiated a radical economic reform to increase the private sectors participation. In 1992, GOI established a committee on Disinvestments of Shares in PSEs, which was further incorporated in 1994 Disinvestment Schedule. These reforms have affected many sectors and caused resistance from different stakeholders. The success rate of disinvestment in India is about 50 percent only (Annexure A). Therefore, the management of various stakeholders including, international agencies, corporate houses, political parties, trade unions/employees, local community, media etc. become crucial for the success or failure of the disinvestment policies. This paper investigates NALCO disinvestment (2002-03 & 2005-06) through case method, based on empirical data. The purpose of the paper is to understand what can be the set of linkages among actors, ideas, actions, and desirable outcomes, agreed upon by stakeholders to determine the effectiveness of the reform process.