Selloff roster in four weeks

New Delhi: The government will come out with a road map for public sector divestment in three to four weeks.

It has ruled out strategic sales, meaning a single investor will not get chunks of a government firm.

“We will have a clear road map in the next three or four weeks,” finance secretary Ashok Chawla said at a budget discussion organised by the Confederation of Indian Industry.

“The government will retain 51 per cent, but the road map for disinvestment in terms of which company will sell how much of its stake and when is being worked out,” he said.

Chawla said selloffs in some companies were already in the pipeline and the market was aware of that. For others “we are in discussion with the ministries concerned”.

Selloffs in Oil India and hydel firm NHPC Limited are due in August-September.

Talking to reporters, Chawla said the finance ministry had held talks with 8-10 ministries.

“The ministries have been consulted. They are going to look at what is feasible, what percentage of stake to sell and when. There is a certain process which takes time,” he said.

He, however, declined to comment on the divestment target for the fiscal. The economic survey had suggested a target of Rs 25,000 crore.

Officials of the finance ministry and the Reserve Bank of India will meet today to prepare a road map for the government’s massive borrowing programme for 2009-010.

The government plans to mop up Rs 2.4 trillion of its targeted Rs 4.5-trillion borrowing for the fiscal by September.

Today's meeting will try to ensure that its huge appetite for funds does not starve private firms of the much-needed cash for investment.

Besides, too much of government borrowing will pull down bond yields and hit bank balance sheets.

According to Chawla, the government will borrow from the market now and later the RBI will support it via open market operations, through which the central bank sucks out or injects liquidity into the system against government bonds.

“We do want to focus on the bond market and the divestment process. By this borrowing, we want more growth and more spending done,” he said.

The government is in a position to borrow as much as Rs 15,000 crore per week, he said.

The economy is likely to recover in the next three months, and hence, it is planning to borrow from the market directly now as later private demand for funds will increase.

“As the economy revives, which we hope it will in the next three months or so, there will be demand for more cash from other players and, therefore, we are trying to borrow more directly at this stage,” Chawla said.

Analysts fear the high borrowings will not only hit private investments but also impact the stock markets.

Chawla ruled out further increases in the fiscal deficit, which is at 6.8 per cent of the gross domestic product for 2009-10. Deficit will come down by 100 basis points in the next fiscal and continue to fall, he said.