New Delhi: The government on Monday approved stake sales in state-run power producer NTPC Ltd and another unlisted power firm, which analysts said reflects the country's resolve to speed up reforms and raise more resources for social schemes.
Disinvestment, raising foreign investment limits in insurance and opening up the pensions sector are the key challenges faced by the Congress Party-led UPA since its re-election in May, even as it strives to cut fiscal deficit and accelerate growth amid a global slowdown.
Since August, the government has successfully raised a total $1.8 billion through its initial public offers in NHPC and Oil India.
On Monday, Trade Minister Anand Sharma said the federal cabinet approved a 5 per cent stake sale in NTPC, India's largest power producer, and 10 per cent in Satluj Jal Vidyut Nigam, an unlisted power producer.
At the current market price of approximately Rs 214 a share, the proposed 5 per cent NTPC stake sale would fetch Rs 88 billion ($1.9 billion).
"It is expected that the market capitalisation of NTPC would be higher and it would help the company to raise resources in the international market on competitive terms," Sharma said.
The minister also said that the cabinet approved Norway's Telenor to raise its stake in India's Unitech Wireless, a unit of realty firm Unitech, which would bring in $808 million in foreign direct investment.
N R Bhanumurthy, an economist at National Institute of Public Finance and Policy said the latest stake sale decision along with the previous two cases imply that the government is serious about disinvestment.
Other areas of economic reform like increasing the foreign direct investment limit in insurance and opening up the pensions sector will also have to be taken up, Bhanumurthy added.
FISCAL WOES
On Friday, Prime Minister Manmohan Singh said many state-run firms are eager to list their shares in the stock market as it would help unlock their value.
Ministers and officials have also named firms such as Steel Authority of India, NMDC, BHEL, Rural Electrification Corp, Shipping Corp of India and Coal India as potential candidates for stake sales.
A government report released ahead of the July federal budget forecast that up to Rs 250 billion per annum could be raised from stake sales in the next five years.
Last week, the finance ministry's chief economic adviser Arvind Virmani told Reuters stake sales would pick up in the months ahead and that the government was considering changing rules for using stake sale proceeds to bridge the deficit.
The fiscal deficit of the federal government is set to widen to 6.8 per cent of gross domestic product in the financial year ending March, from 6.2 per cent of 2008/09, mainly on higher stimulus spending and lower tax receipts.
The government aims to bring down the deficit to 5.5 per cent in 2010/11, and further to 4 per cent in 2011/12.
Comments
0 comment