Whether or Not to Disinvest: The Case of Gujarat State Fertilizers & Chemicals Limited
AbstractIndia became independent in 1947. Its central planning model emphasized the development of core sectors of Indian economy through Public Sector Undertakings (PSUs). PSUs played an active role in economic development for more than four decades. The process of liberalization and globalization began in 1991. The Central and State Governments initiated process of disinvestment and decontrol in various PSUs. Gujarat State Fertilizers & Chemicals Limited (GSFC) was one of such PSUs. It was promoted in 1962 by the State Government of Gujarat (GoG) with its 49% equity share, as a joint sector fertilizer company. The objective of the Government was to promote agricultural growth by providing chemical fertilizers and other inputs along with extension services to the farmers. Over the years, it diversified into industrial products. It was also instrumental in promotion of other PSUs in Gujarat through equity participation. It had a strong brand image among the farmers.In 2004, GoG appointed an Expert Committee (EC) to review the performance and sustainability of various PSUs in the State of Gujarat including GSFC and to recommend whether or not the Government should continue to hold its investment in them. The task of EC in providing recommendations on GSFC was very challenging because GSFC incurred losses for the first time during 2000–1 to 2002–3 since its inception but showed dramatic turnaround in 2003–4 and further improved its financial performance in 2004–5 and 2005–6. EC had to reassess the developmental role of GSFC and the need for GoG to continue its involvement. It had to assess the sustainability of improved financial performance in future and decide whether or not GoG should disinvest its stake.
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Bibliographic InfoArticle provided by World Scientific Publishing Co. Pte. Ltd. in its journal Asian Case Research Journal.
Volume (Year): 11 (2007)
Issue (Month): 02 ()
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Web page: http://www.worldscinet.com/acrj/acrj.shtml
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