India’s government is considering selling shares in state companies at regular intervals based on a public calendar, two officials with knowledge of the proposal said, as the nation steps up efforts to pare its budget deficit.
The Finance Ministry is reviewing the plan for scheduled disposals, the two officials said, asking not to be identified as the deliberations aren’t public. Shares in New Delhi-based NTPC Ltd., India’s biggest electricity producer, would be offered first, one of the officials said.
India has the widest budget deficit among major emerging nations and raised diesel prices this month for the first time in over a year to contain the gap by paring fuel subsidies. The government aims to raise 300 billion rupees ($5.6 billion) from share sales in the year that began April 1 to narrow the fiscal shortfall and avert a credit-rating downgrade.
“The strategy seems to be to revive market sentiment,” said Amol Agrawal, an economist at STCI Primary Dealer Ltd. in Mumbai. “It will be challenging to translate that into actual sales and the government needs to give us its long-term plan to curtail the deficit.”
Stakes in nine companies where the government holds more than 90 percent would be sold by June 30, 2013 based on the plan under consideration, one of the officials said. The sales would occur in a specified period every month or fortnight, both officials said.
The Indian government has a shareholding exceeding 90 percent in 12 companies, according to SMC Global Securities Ltd. They are HMT Ltd., Fertilisers & Chemicals Travancore Ltd., Scooters India Ltd., Neyveli Lignite Corp., Andrew Yule & Co. Ltd., ITI Ltd., Rashtriya Chemicals & Fertilizers Ltd., State Trading Corp. of India Ltd., State Bank of Mysore, MMTC Ltd., National Fertilizers Ltd. and Hindustan Copper Ltd.
The administration has raised 1.25 billion rupees so far this fiscal year from the sale of a stake in National Buildings Construction Corp.
Prime Minister Manmohan Singh followed the 14 percent rise in diesel prices with steps to open the economy to more foreign investment, part of a burst of policy changes to revive Asia’s third-largest economy after months of inaction.
The government set a budget-deficit target of 5.1 percent of gross domestic product for the current financial year in the budget released in March. Citigroup Inc. estimates the shortfall will be 5.9 percent and Crisil, Standard & Poor’s local unit, forecasts 6.2 percent. The deficit was 5.8 percent in 2011-2012.
The Reserve Bank of India has signaled that narrowing the budget gap is pivotal to increasing room for interest-rate cuts to bolster economic expansion.
GDP grew 5.5 percent in the three months through June from a year earlier, a pace close to the three-year low of 5.3 percent in the first quarter. The faltering expansion has sapped tax revenues as subsidies from food to fuel stoke government spending.
Standard & Poor’s and Fitch Ratings reduced the outlook on India’s credit rating to negative from stable earlier this year, bringing the nation a step closer to junk status on risks including the fiscal gap and a trade deficit.