Govt to sell 10% stake in NMDC

The government is planning to sell a 10-per cent stake in NMDC Ltd as part of an alternative to raise funds through divestment of stake in state-run companies, the finance ministry said today.

The finance ministry did not say how much it expects to raise through sale of the 10-per cent stake in NMDC, the country's largest iron-ore miner, but analysts estimate it could help the government raise about Rs5,500 crore at its current share price.

The proposed stake sale is part of an alternative plan to raise up to Rs62,000 crore this fiscal by selling stakes in several state-run companies. The government is in urgent need of finances to meet the fiscal deficit target of 4.1 per cent of gross domestic product for the current fiscal.

The government has so far raised around Rs19,000 crore out of the proposed Rs62,000 crore and the deficit target looks difficult to achieve also because of the slow growth in revenue.

The finance ministry said it has sought bids from bankers to manage the sale, but didn't say how soon it could take place.

The government currently owns 80 per cent stake in NMDC, which would come down to 70 per cent after the divestment.

Reports quoting finance ministry sources had said last week the government was now considering putting other assets on the block, including 10 per cent of IOC, worth Rs8,060 crore ($1.3 billion) at current market prices.

At the top of the sell-off list are Coal India Ltd (OIL) and Oil and Natural Gas Corp (ONGC), in which the government plans to sell 10 per cent and 5 per cent, respectively, together worth around Rs39,060 crore ($6.3 billion) at current prices.

However, with lukewarm demand, including plunging oil prices and questions over ONGC's fuel subsidy burden, has hampered sale of stake in IOC and ONGC. And without clarity on coal output targets and future role of Coal India, the sale of CIL stake also is in jeopardy.

"Disinvestment is a major concern. This year again we are likely to fall well short of the target," the report had quoted another government official as saying.