New Delhi, May 12 -- A new proposal by the Securities and Exchange Board of India (Sebi) to create a special delisting route for public sector undertakings (PSUs) with 90% or more government ownership has stirred a broader debate on regulatory parity between state-owned and private companies.

The proposal would essentially allow the PSU to delist itself, either to go private, merge with another company, or because the costs of being publicly listed outweigh the benefits.

Sebi said the move would benefit PSUs with very low public shareholding and/or weak financials, as noted in the 6 May consultation paper.

It reasoned that the proposal could help profitable firms that lack long-term business prospects due to outdated product lines or g...