India's government is scrambling to put together a 'Plan B' to raise even a fraction of its $10 billion target from asset sales, officials said, with potential new sales including part of its stake in refiner Indian Oil. Prime Minister Narendra Modi's government, elected last year, needs to complete some major deals to deliver on a budget promise to trim the fiscal deficit to a seven-year low by the end of the year in March.
Pressure on the government increased with the Reserve Bank of India's surprise move on Thursday to cut interest rates, placing the onus on the government to help revive the economy by putting public finances on a firmer footing. One official in the finance ministry's department of disinvestment said on Friday the government was now considering putting other assets on the block, including 10 percent of IOC, worth $1.3 billion at current market prices.
Top of the sell-off list are Coal India and Oil and Natural Gas Corp (ONGC), in which the government plans to sell 10 percent and 5 percent respectively, stakes that are together worth around $6.3 billion at current prices, a large part of the target. But demand has been lukewarm, not least due to plunging oil prices and questions over ONGC's share of fuel subsidies. "Disinvestment is a major concern. This year again we are likely to fall well short of the target," another government official said. A sale of IOC, in which the government owns nearly 69 percent, could be more welcome in the market than either ONGC or Coal India, where fund managers want clarity on coal output targets, and on the amount of subsidies ONGC will need to pay.