Bid to hive off stakes in energy firms to tide over India’s fiscal deficit

India has moved a step closer to selling off stakes in major energy companies and its coal mining firm as it strives to reduce the country’s fiscal deficit.

The cabinet committee on economic affairs last Wednesday cleared the way for a 10 per cent stake sale out of the government’s shareholding of 89.65 per cent in Coal India.

The cabinet also approved plans for a 5 per cent stake sale of the government’s shareholding in the Oil and Natural Gas Corporation and 11.36 per cent of its interest in NHPC, which was formerly known as the National Hydroelectric Power Corporation.

The government’s “decision to offload stake in public enterprises is a positive step towards lowering India’s fiscal deficit”, said Kiran Kumar Kavikondala, the director and chief executive of WealthRays Securities, a research firm based in Bangalore. “For a retail investor it would be good opportunity to lock in their long-term savings.”

The sales were expected to raise more than 430 billion rupees (Dh25.97bn).

The government has projected fiscal deficit to come in at 4.1 per cent of GDP in the current financial year. The cash could also be used to fund infrastructure projects.

But plans to sell off a stake in Coal India have met with stiff opposition from trade unions, who have threatened to strike over the plans for the public-sector company because they fear privatisation and exploitation.

“Efforts are being made to reconcile the same,” Coal India said in a statement to the Bombay Stock Exchange.

Last year, threats of strikes derailed a planned stake sale in Coal India.

Mr Kavikondala described Coal India as a “top pick” for the long term.

Emkay Global Financial Services, based in Mumbai, last month issued a hold rating on the stock.

“More structural changes are needed in policies related to land acquisition and logistics to drive higher volumes in the long term on a sustainable basis [for Coal India],” it wrote in a note to clients.

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