At a time when the government’s ongoing dose of fiscal reforms has helped revive investor sentiments, finance minister P Chidambaram is pushing for a stake sale in NTPC Ltd, India’s largest power company, overruling concerns raised by the power ministry.
Chidambaram had told his aides that the Rs. 30,000 crore disinvestment target for the current fiscal has to be met, and the proposed sale in NTPC alone can help rake in over Rs. 15,000 crore for the current fiscal.
Repeated slips in achieving the disinvestment target have led to a widening fiscal deficit. And six months into the fiscal, the government is yet to raise anything against the Rs. 30,000 crore target.
In 2011-12, the government could garner only Rs. 13,894 crore against its Rs. 40,000 cr target, and the year before it raised Rs. 22,144 crore against a target of Rs. 40,000 crore.
In its response to a draft cabinet note from the department of disinvestment (DoD) for a 9.5% stake sale in NTPC, the power ministry opposed any immediate sale on grounds that the current stock price of NTPC (at Rs. 166 a share) is much below its 2010 FPO offer price of Rs. 205 a share, and any sale at this juncture would go at a massive discount.
“The finance ministry feels that the improved market sentiments in the backdrop of a slew of reform measures can help the government achieve its disinvestments targets,” a senior government official said.
“The FM has indicated that he would be aggressive in the remaining period of the fiscal with disinvestments as the set target has to be met,” he added.
The debt recast package by the government for the state electricity boards to deal with their Rs. 1.9 lakh crore of consolidated debt is another big reform measure expected to boost NTPC’s proposed issue.