Pinning its hopes on big ticket disinvestments to cut down its widening fiscal deficit, the Cabinet on Thursday cleared the proposal to disinvest a 9.5% stake in India’s largest power producing company, the state-owned NTPC Ltd.
The sale in NTPC of around 783 million shares — likely to be through the offer for sale (OFS) route — assumes importance as this single stake sale is expected to fetch the government close to Rs. 13,000 crore, which is 43% of the Rs. 30,000 crore disinvestments target set by the finance ministry for 2012-13.
At present, the government holds 84.5% stake in NTPC and post the offering its stake will come down to 75%.
The Cabinet also directed the coal ministry to re-allocate four coal blocks to NTPC that were de-allocated sometime back following slow progress by the company in developing these blocks.
However, sources said that as the progress on developing the coal blocks was held up due to lack of regulatory approvals beyond NTPC’s control, the Cabinet decided to give back these blocks to the state-owned power major.
The government is confident of meeting its disinvestments target set for this fiscal year.
In 2011-12, the government could garner only Rs. 13,894 crore against the target of Rs. 40,000 crore. And, the year before it raised Rs. 22,144 crore against a target of Rs. 40,000 crore.
The power ministry had earlier opposed any immediate sale in NTPC on grounds that the current stock price of NTPC (at around Rs. 168 per share) is much below its 2010 FPO (Follow on Public Offer) offer price of Rs. 205 per share, and any sale at this juncture would go at a massive discount.
However, an undeterred finance ministry did not relent and decided to go ahead with NTPC’s stake sale.