Cancellation of disinvestment of Central Electronics Ltd (CEL)- Why has government exonerated DIPAM and its advisors?



Smt Nirmala Sitharaman
Union Finance Minister

Dear Smt Sitharaman,

I gather that the government has decided to scrap disinvestment of the Central Electronics Ltd (CEL), apparently on the ground that there were quasi-judicial proceedings pending against the bidder selected by DIPAM, a fact that  the bidder had not disclosed. Thus, the blame seems to have been placed entirely on the bidder for not disclosing this fact to DIPAM (

The latest decision of the government raises concerns about the credibility of the CPSE disinvestment process itself, as indicated below.

  1. Your Ministry had received complaints against disinvestment of the CEL from several quarters, including CEL’s employees. The complaints were not merely about the pending legal proceedings but also the credibility of the two bidders and their background. Apparently, your Ministry is now trying to underplay the latter complaint, namely, the antecedents of the two bidders.
  2. It is not as though it was DIPAM that first discovered the fact of non-disclosure by the selected bidder. Your Ministry received complaints from an observant civil society including CEL’s employees and several other civil society bodies. I myself had addressed you several times ( It is surprising that DIPAM’s CPSE disinvestment machinery had no self-correcting mechanisms for exercising due diligence at every stage of the process. This throws a shadow on the entire CPSE disinvestment approach of the government and its credibility.
  3. DIPAM itself has been created specifically to subject every step of CPSE disinvestment process to strict scrutiny for upholding the public interest. Has the government chosen to exonerate that department altogether? The fact that your Ministry had chosen to commission an internal enquiry into the matter was in itself sufficient to indicate that it was never serious about fixing the responsibility for the sad ending of the CEL disinvestment saga, which has raised serious concerns about the integrity of the government’s CPSE disinvestment approach. If the government is genuinely concerned about the lapses involved, it ought to have commissioned an independent investigation.
  4. What has been the role of the transaction advisors of DIPAM in the specific case of CEL disinvestment? The transaction advisor, who I am sure, had been paid handsomely by DIPAM, was expected to help that department in scrutinising the antecedents of the bidders in question and raising the red flag at every stage. Apparently, the company had failed in it.
  5. I find that the same transaction adviser has been appointed by DIPAM to advise on disinvestment of several other CPSEs, as for example, in the case of Project & Development of India, Scooters India Ltd, Hindustan Newsprint Ltd., Bharat Pump & Compressors Ltd., and so on ( If it is established that Resurgent India Ltd. had not discharged its role satisfactorily, apart from imposing a penalty on it, I would suggest that your Ministry precludes the company from all future CPSE-related transactions.

The CEL saga corroborates what some of us have been pointing out all these days about the shortcomings of the government’s CPSE disinvestment approach. Valuable CPSE assets are being undersold, as if it is a distress sale. It is fallacious to think that selling CPSEs will get additional fiscal resources for the government. Exclusion of the other CPSEs from bidding has severely limited the competition. The companies that buy the CPSEs have no capacity to take them over and continue their operations in line with the national interest.

Against this background, I feel that the government should revisit its policy of privatising CPSEs and monetising their assets and adopt policies that genuinely subserve the national interest.


Yours sincerely,

E A S Sarma

Former Secretary to Govt of India



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