INDIA said on Wednesday (January 30) it planned to sell a 10 per cent stake in state-run refinery Oil India this week for at least $465m (£294.38) as part of plans to reduce its budget deficit.
The Congress-led government of Prime Minister Dr Manmohan Singh urgently needs to raise capital from privatisation with the deficit threatening to exceed a targeted 5.3 per cent of gross domestic product.
The government hopes to raise Rs25bn to 30bn ($465m/£294.38m -$561m/£355.15m) with its offer of 60 million shares from the Oil India sale set for Friday (February 1), said Oil Secretary GC Chaturvedi.
“The proposal has been cleared,” the oil secretary told reporters.
The government was forced to jettison a few earlier sell-offs due to sluggish market conditions in a sharply slowing economy.
But it has re-energised its privatisation drive with India’s market now trading at two-year highs on investor optimism about an economic upturn.
The government was expected to sell the shares of Oil India at a discount to the prevailing share price. The shares closed down 2.3 per cent at Rs527.15 ($9.90/£6.26) on Wednesday.
The government holds a 78.43 per cent stake in the company that would fall to 68.43 per cent after the sale.
New Delhihas collected only Rs69bn ($129m/£82m) in its privatisation drive, raising fears it will be unable to attain its Rs300bn ($563m/£356m) goal for the current financial year to March 2013 and meet its deficit reduction target.
Cutting the deficit has become even more vital since global ratings agencies Standard & Poor’s and Fitch reduced India’s sovereign ratings outlook to “negative”, jeopardising the country’s investment-grade status.
The government has a string of sell-offs planned for the last two months of the fiscal year, including disposal of an 11 per cent stake in iron and steel production giant Steel Authority of India.
