New Delhi: The cabinet committee on economic affairs on Wednesday approved stake sales in Coal India Ltd (CIL), Oil and Natural Gas Corp. Ltd (ONGC) and NHPC Ltd, seeking to raise money that could help plug the government’s fiscal deficit and fund public works projects to lift economic growth.

The National Democratic Alliance (NDA) government led by Narendra Modi will sell a 5% stake in ONGC, the country’s biggest energy explorer, 10% in CIL, the world’s biggest coal miner, and 11.36% in NHPC, the state-owned hydropower producer.

At current market prices, the divestments through the so-called offer for sale (OFS) route would raise a total of 43,800 crore, helping the government more than meet its target of raising 43,425 crore from stake sales in companies it controls. It now owns 68.94% of ONGC, 89.65% of CIL and 85.96% of NHPC.

“If it gets the pricing right, then there is enough appetite for the shares of these PSUs (public sector units) as the quality of such stocks is not an issue," said Prithvi Haldea, founder and chairman of Prime Database that tracks primary market activity.​

Proceeds from the sales could be used to bridge the government’s fiscal deficit in the year ending 31 March, projected at 4.1% of gross domestic product (GDP), and finance ambitious infrastructure projects announced in its first budget after coming to power in the April-May general election. They could also go towards recapitalizing public sector banks and insurance companies.

The finance ministry is seeking to capitalize on positive investor sentiment generated by the formation of a stable government after the election and hope of economic revival after two consecutive years of sub-5% economic growth. The BSE’s benchmark Sensex has gained 27.8% since the start of the year, a period in while foreign investors have bought a net $13.89 billion of shares from local equity markets.

The government is expected to double the quota for the public from 10% to 20% under the OFS route to increase small-investor participation in the disinvestment programme

At current prices, the government would raise 23,000 from the sale of shares in CIL, 18,000 crore from ONGC and 2,800 crore from NHPC.

The budget set a disinvestment target of 58,425 crore, including 15,000 crore from the sale of residual stakes in the erstwhile government companies.

The government has already selected investment bankers for managing the ONGC and NHPC disinvestment and is in the process of doing so for CIL.

Prime Minister Modi’s government came to power on the plank of boosting economic growth and fixing the fiscal mess it inherited from the United Progressive Alliance (UPA) regime. Growth rebounded to 5.7% in the quarter ended 30 June, the fastest in two-and-a-half years.

As economic growth accelerated, finance minister Arun Jaitley said last month that the fiscal deficit target of 4.1% of GDP for the current financial year seems achievable after having earlier described it as a daunting challenge.

“What appeared a challenge at the time of the budget now seems achievable. I am much more confident today if the current trend continues," Jaitley said.

To be sure, trade unions are resisting the stake sales, posing the risk of delays.

“We will oppose this disinvestment tooth and nail," said S.Q. Zama, secretary general of the Indian National Mineworkers’ Federation. Zama said all five labour unions of CIL will oppose the move. “We can go to any extent for this, even if it means a strike."

Minister of state for finance Nirmala Sitharaman said in the Rajya Sabha last month that ONGC, while supporting the divestment plan, had suggested the resolution of a few issues, including the gas pricing policy, before going ahead with the stake sales.

The previous government missed meeting its disinvestment target for five consecutive financial years. In 2013-14, the government managed to raise 16,027 crore, less than half the budgeted target of 40,000 crore.

NHPC has told the Union power ministry that it may report a loss in the current fiscal year. Its failure to start the construction of the Lower Subansiri project in Arunachal Pradesh, delay in payments by the Jammu and Kashmir government, and low tariffs that do not cover high construction costs will have a 988 crore impact on NHPC, it said in a 20 August communication to the power ministry.

“All these issues will have an impact on the share valuation of the company also and may adversely affect the disinvestment proposal in a significant way," it said in a letter, a copy of which was reviewed by Mint.

In other decisions on Wednesday, the government approved a 950 crore project for development of the coffee sector and a 5,300 crore project to boost telecom infrastructure and connectivity in the North-East. It decided to raise the authorized capital of National Export Insurance Account to 4,000 crore to help boost project exports.

The cabinet also cleared a 8,112.12 crore investment for NHPC’s Pakal Dul project in Jammu and Kashmir, which will help reduce power shortages in the northern region.

It also approved the fifth phase of the Unique Identification project that entails generation of one billion Aadhaar numbers by 2015. The government gave the go-ahead to the Unique Identification Authority of India, which is implementing the Aadhaar project, to enrol residents of Uttar Pradesh, Bihar, Chhattisgarh and Uttarakhand.

The means an additional 1,200 crore allocation towards the Aadhaar, taking the total allocation to 14,000 crore till 2017.

Aman Malik, Utpal Bhaskar and Shauvik Ghosh contributed to this story.

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