India plans to raise 350 billion rupees ($6.5 billion) next fiscal year by selling shares in state-owned companies as the nation strives to pare its budget deficit, two officials with knowledge of the proposal said.
The government aims to sell stakes in companies including Coal India Ltd., Indian Oil Corp., Engineers India Ltd., Power Grid Corp. of India Ltd. and Bharat Heavy Electricals Ltd., the Finance Ministry officials said, asking not to be identified as the plan isn’t public.
The offering for Kolkata-based Coal India, the world’s largest producer, will be the biggest and will seek to raise 200 billion rupees, both officials said.
Finance Minister Palaniappan Chidambaram, who unveils the budget on Feb. 28, has pledged to bolster the state’s revenues and curb spending to narrow the widest budget deficit in major emerging nations. The government has raised about 72 percent of its 300 billion rupee target for share sales in the fiscal year through March 2013.
Chidambaram has vowed to contain the excess of expenditure over receipts at 5.3 percent of gross domestic product in the 12 months that began April 1, and at 4.8 percent next financial year. The government partially freed diesel prices from state control last month to limit fuel subsidies.
Officials are trying to avert a credit-rating downgrade, after Standard & Poor’s and Fitch Ratings said in 2012 that they may demote India to junk status because of the fiscal gap and the current-account deficit.
Prime Minister Manmohan Singh’s government has raised about 215 billion rupees this financial year from share sales, including about 115 billion rupees by disposing of a stake in power company NTPC Ltd. last week.
The Reserve Bank of India has signaled that narrowing the budget gap is pivotal to boosting room for interest-rate cuts to aid growth. Inflation exceeding 7 percent has limited it to two reductions in borrowing costs since the start of April last year.
India’s statistics agency predicts GDP will climb 5 percent in the 12 months through March, the weakest pace in a decade, after a moderation in investment and a drop in exports.