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Govt plans big push to privatisation drive

Unni Krishnan in New Delhi

India is drawing up a strategy to give a big push to its privatisation drive and raise Rs 500 billion through stake sales in state-run firms, a senior government official said on Friday.

The official said the divestment ministry has made a presentation to Prime Minister Atal Behari Vajpayee who has the final word on stake sales in state firms.

"We can do seven large companies through the strategic sale route and raise Rs 250 billion," the official, who did not wish to be named, told Reuters.

The latest push to the country's privatisation drive comes after the government overrode opposition and sold stakes in a giant telecoms company, an oil firm and the country's largest car maker earlier this year.

The official said the government could also raise another Rs 250 billion by offloading stakes of 10 to 25 per cent in some large state-run firms in the primary market.

He mentioned Indian Oil Corp, Mahanagar Telephone Nigam Ltd, Bharat Sanchar Nigam Ltd, Gas Authority of India Ltd, Oil and Natural Gas Corp and National Thermal Power Corp as possible sale candidates.

The plan, if approved, would help the cash-strapped government bridge its yawning fiscal deficit. The government plans to rein in the fiscal deficit to 5.3 per cent in the year to March 2003 from 5.7 per cent the previous year.

BIG PUSH

"These proposals are part of the presentation that we have made to the prime minister. But no timeframe has been fixed as several rounds of discussions are needed before we finalise them," the official said.

India plans to raise Rs 120 billion from sales of shares in state-run firms in the current financial year. It has consistently failed to meet targets in the past because of stiff opposition from political parties and trade unions.

There are about 240 state-run firms in India manufacturing everything from steel to condoms. Most of them are loss-making and saddled with excess manpower.

"Another plan is that the government be allowed to withdraw reserves from the large state-run companies before privatisation of these firms," the official said.

He said there was also a plan to let domestic financial institutions offload their stakes in state-firms, taking advantage of high valuations in the secondary market.

"According to our plan, strategic sales should be done simultaneously with minority stake sales in domestic and global markets to attract higher valuations," the official said.

Another official said the divestment ministry has proposed strategic sales of between 25 and 35 per cent of giant petroleum refining and marketing firms Bharat Petroleum Corp and Hindustan Petroleum Corp.

"We hope to complete the sales in HPCL and BPCL within this year," the official said.

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