The coalition Government may signal in Budget that the divestment of state equity in public sector units will continue despite stiff protests by its Left allies, experts say.
The Congress-led United Progressive Alliance Government is, however, not likely to go for outright sale of public sector companies to the private sector and would instead tap the public offering route to divest its equity.
Finance Minister P Chidambaram will present the Budget for the fiscal year 2005-06 to Parliament on February 28.
"The disinvestment momentum, in whatever shape, will regain some momentum in the coming fiscal year," said chief economist of India's leading independent credit rating firm CRISIL Ltd, Subir Gokarn.
"Politically, it will be difficult for the Government to surrender management control of the public sector companies by selling off its equity to any strategic investor," Gokarn told IANS.
"So the public offering is the only route by which the Government can sell some shares to raise revenues without giving up control. I think this option will keep the disinvestment programme alive."
According to Gokarn, the Government would be tempted to rush to tap the public offering route in the months ahead as the stock market continues to scale new highs on massive inflows of institutional funds.
India's benchmark share market index -- Sensex finished at an all-time high of 6,679.33 on February 14 as the dream run on the bourses was revived after over a month's gap on large-scale fund buying on hopes of a reformist Budget.
{{/usCountry}}India's benchmark share market index -- Sensex finished at an all-time high of 6,679.33 on February 14 as the dream run on the bourses was revived after over a month's gap on large-scale fund buying on hopes of a reformist Budget.
{{/usCountry}}Experts say the Government will have to push ahead aggressively with economic reforms, including privatisation of state-run firms, to bring down fiscal deficit to sharply lower levels.
The Government had hoped to raise some Rs 24 billion in the current fiscal year from the divestment of stakes in the country's largest carmaker Maruti Udyog and engineering equipments maker Bharat Heavy Electricals (BHEL).
The proposal was, however, put on the hold last month in the wake of stiff resistance by the Left parties, which lend crucial support to the multi-party Government.
In a move to assuage the communists, the Government announced the setting up of an investment fund of stake sale proceeds for social projects and the growth of state-run firms.
Some of the public sector units that are likely to float public offerings to reduce Government's stake include Power Finance Corp, Power Grid, Shipping Corp of India, National Hydro Electric Corp and Engineers India.
Unlisted companies like the domestic aviation major Indian Airlines and the national flag carrier Air-India may also tap the stock market to raise resources to compete with the more resourceful private companies.
"Although the Government is committed to reducing its stake in public sector firms, it doesn't want to approach it by using the word privatisation," said economist with independent think-tank RPG Foundation, DH Pai Panandiker.
"The Government's stake may go below 50 per cent in very rare cases. The divestment exercise will not go the full length of government taking its hands out of the affairs of public sector companies," he added.
"From an economist's point of view, I would prefer the route of strategic sale to reduce the government's equity in state-run companies. The basic thing is the Government's future is in governance and not in running companies."
In its Common Minimum Programme (CMP) for governance released soon after coming to power in May 2004, the United Progressive Alliance had said public sector companies would be encouraged to enter the capital market to raise resources.