Economic Survey says govt could amend Companies Act to ease equity monetisation

The Economic Survey 2025–26 has suggested that the government could consider amending the definition of a “government company” under the Companies Act to enable greater equity monetisation from central public sector enterprises (CPSEs), while retaining effective control through special resolution rights. The Survey pointed out that current legal constraints are limiting further disinvestment in a significant share of listed CPSEs. “Currently, in about 30 per cent of listed CPSEs, Government shareholding is already below 60 per cent, limiting further disinvestment through OFS, as it is stipulated in the Companies Act that a ‘government company’ must have at least 51 per cent of its stake held by the central or state government,” it said. “Going forward, receipts from equity monetisation can be strengthened by selectively reducing Government equity in certain CPSEs beyond the minimum public shareholding norms,” the Survey said, adding that such decisions should be “guided by market conditions and enterprise-specific factors”. Finance Minister Nirmala Sitharaman tabled the Economic Survey in Parliament on January 29. The Survey noted that effective control does not require majority ownership. “Since effective control requires only about a 26 per cent 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 per cent ownership,” it said. Such a change, the Survey said, would allow the government to “retain special resolution rights, while enabling the government to monetise its stake”. This approach, it added, could unlock additional equity monetisation without diluting strategic control over key enterprises. Alternative route: phased exit without legal change The Survey also outlined an alternative path if the government’s objective is eventual privatisation. “Alternatively, if the objective is eventual privatisation, the Government could continue phased OFS below 51 per cent and even towards full exit, without changing the legal definition of ‘government company’,” it said. This approach would enable CPSEs to operate after disinvestment “as professionally managed entities with dispersed ownership, clear governance standards, and transparent succession frameworks,” the Survey noted. Recycling disinvestment proceeds The Survey further suggested that disinvestment receipts could be channelled towards future-oriented investments. “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), thereby recycling public capital toward future growth sectors,” it said. “This will also ensure a steady stream of disinvestment receipts into the future,” the Survey added. Strategic disinvestment progress According to the Survey, strategic disinvestment has proceeded in a calibrated manner in recent years. “Since 2016, in-principle approval has been accorded for strategic disinvestment for 36 CPSEs, of which 13 transactions have been completed, with the remainder at various stages of implementation,” it said. During FY26, the government also moved ahead with stake dilution and exits from select joint ventures. “During FY26, approvals were also accorded for stake dilution or exit from select joint ventures, including NTPC’s divestment from Utility Powertech Limited,” the Survey said. These steps, it added, were supported by broader governance reforms. “These actions were complemented by governance reforms that empowered CPSE Boards to undertake the closure, merger, or disinvestment of subsidiaries,” the Survey said. Taken together, the Survey’s assessment suggests that a combination of legal flexibility, calibrated disinvestment and governance reforms could expand equity monetisation options for the government, while strengthening CPSE governance and redeploying public capital towards emerging growth areas.