Economic Survey 2026: Government May Redefine ‘Public Sector Company’ with 26% Stake Threshold

New Delhi: The Economic Survey 2026, presented in Parliament, has proposed a major change in the definition of public sector companies. Under the new recommendation, a company could be classified as government-owned even if the government holds only 26% stake, down from the current threshold of 51%. This move aims to facilitate partial divestment, improve management efficiency, and generate revenue for the exchequer.

Key Recommendation

The suggestion comes from Chief Economic Advisor V. Anantha Nageswaran and his team. They argue that even with a 26% stake, the government can influence major company decisions, making it possible to classify a firm as public-sector without holding a majority.

This change would allow the government to ease the exit from companies it no longer wishes to invest in, using mechanisms such as the Offer for Sale (OFS) route to sell shares without needing to maintain 51% ownership.

Privatization Track Record

Since 2016, the government has approved the privatization or sale of 36 public-sector companies, 13 of which have already been fully divested. Many others are at various stages of the process.

Currently, around 30% of public-sector companies have government stakes below 60%. Under existing laws, a company must have at least 51% government ownership to be classified as public-sector, which has created bottlenecks in divestment via OFS and share sales.

Benefits of the New Definition

The proposed change could:

• Allow the government to exit companies no longer central to its agenda.
• Enhance management efficiency by increasing private-sector influence when government stake falls below 51%.
• Serve as a strategic exit plan, giving flexibility to reduce ownership while retaining influence over major decisions.

For instance, if the government holds 51% of a company but believes it can perform better with private management, it could reduce its stake to 26%. While day-to-day control would shift, the government would still influence key strategic decisions, ensuring a balance between autonomy and oversight.

Implications

Economists say this move could accelerate privatization, improve operational efficiency, and enable a more flexible approach to public-sector management. Reducing government stake while retaining influence may allow companies to harness private-sector expertise, improve performance, and generate greater returns for shareholders and the exchequer alike.

This proposal represents a significant rethinking of public-sector governance, emphasizing both financial prudence and strategic flexibility in managing state-owned enterprises.