Economic Survey 2025-26 bats for 26% government shareholding in PSUs

In a push to restart disinvestment in government companies through offer for sale (OFS), the Economic Survey 2025-26 has made a strong case for amending the Companies Act to allow entities to retain government company character even with a minimum 26% ownership.

At present, state-run companies should have a minimum 51% government shareholding. Any fall in ownership below this level changes a company's categorization to private.

“Since effective control requires only about a 26% stake, the government could consider amending the definition of “government company” under the Companies Act, limited to listed entities, to allow them to remain as government companies with a minimum of 26% ownership, thereby retaining special resolution rights, while enabling the government to monetize its stake,” said the survey presented in Parliament on Thursday.

It added that as an alternative, if the objective is eventual privatization, the government could continue phased OFS below 51% and even towards full exit, without changing the legal definition of “government company”.

This would enable central public sector enterprises (CPSEs) to function post-disinvestment as professionally managed entities with dispersed ownership, clear governance standards, and transparent succession frameworks, the survey said.

Currently, in about 30% of listed CPSEs, government shareholding is already below 60%, limiting further disinvestment through OFS, as it is stipulated in the Companies Act that a ‘government company' must have at least 51% of its stake held by the central or state government.

Disinvestment push

Going forward, receipts from equity monetization can be strengthened by selectively reducing government equity in certain CPSEs beyond the minimum public shareholding norms, guided by market conditions and enterprise-specific factors, the survey said.

It also said a portion of disinvestment receipts could also be earmarked for strategic investments in emerging technology and innovation-driven companies through professionally managed platforms such as the National Investment and Infrastructure Fund (NIIF), recycling public capital towards future growth sectors. This will also ensure a steady stream of disinvestment receipts into the future.

The government has not been meeting its disinvestment targets for the past few years, and the focus has now shifted towards asset monetization rather than offloading its equity under the OFS route.

For the fiscal year 2022-23, the government pegged the disinvestment target at ₹65,000 crore, with a revised estimate at ₹50,000 crore, while the 47.8% target was achieved. For 2023-24, the government pegged the disinvestment target at ₹51,000 crore, with a revised estimate at ₹30,000 crore, while the 28.6% target was achieved.

In the last fiscal year, too, the disinvestment target of ₹50,000 could not be achieved, while the ₹47,000 crore target for 2025-26 is also expected to be missed.

Lowering the definition of a government company will help public sector banks, several of which need additional capital but are close to the 51% government shareholding threshold and prevent share offloading.