India plans to accelerate sales of state companies to meet the fiscal-year goal of 400 billion rupees ($7.4 billion) by December, two finance ministry officials with direct knowledge of the matter said.
The government wants to wrap up the stake sales before elections are announced, one of the people said. Policy makers want to take advantage of a rebound in stocks for better valuations, the other person said. The officials asked not to be identified because they aren’t authorized to speak on the subject. Indian national elections are due by May 2014.
In the fiscal year through March, the government plans to reduce its holdings in Coal India Ltd., National Aluminium Co., Rashtriya Ispat Nigam Ltd., Indian Oil Corp., Power Grid Corp. of India and Bharat Heavy Electricals Ltd. Finance Minister Palaniappan Chidambaram is counting on revenue from shares of government-controlled companies to narrow the budget deficit and maintain an investment-grade credit rating after a similar program fell 20 percent short of target last year.
The benchmark S&P BSE Sensex (SENSEX) index has jumped 9 percent from a seven-month low reached on April 9 as the central bank cut interest rates three times this year to revive economic growth from the slowest pace in a decade.
Starting September, Prime Minister Manmohan Singh’s administration has taken steps to boost economic growth by reducing energy subsidies, allowing more foreign investment in industries including aviation and retail and cutting levies on capital inflows.
The asset-sale program fell short of its 300 billion rupees target in the year ended March 31, with the government managing to raise only 80 percent, according to data provided by the finance ministry. D.S. Malik, the New Delhi-based spokesman at the ministry, declined to comment.
The yield on the benchmark 8.15 percent government bond due June 2022 slipped 1 basis point, or 0.01 percentage point, to 7.73 percent as of 11:10 a.m. in Mumbai. The rupee was little changed at 54.115 a dollar.
State-run Coal India and Indian Oil Corp. could be offered for sale first as they may fetch a “substantial amount,” one of the officials said. The government may get about 200 billion rupees by selling a 5 percent stake in Coal India to the public and a similar holding to the company, according to a finance ministry’s draft proposal obtained by Bloomberg News last month.
Initial public offerings have dropped 55 percent to 3.5 billion rupees in the worst start to a year since 2009, according to data compiled by Bloomberg.
Chidambaram has vowed to reduce the budget shortfall to 4.8 percent of gross domestic product in the current financial year, from an estimated 5.2 percent in the previous 12 months.
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