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India approves share sales in IOC, NTPC as part of asset divestment

[NEW DELHI] India's government has approved the sale of shares in state-run oil refiner Indian Oil Corp and power producer NTPC as part of its plan to raise US$11 billion from asset sales this financial year.

New Delhi will sell a 10 per cent stake in the oil refiner and 5 per cent in the power producer, a top government official told reporters after a cabinet meeting on Wednesday, asking not to be named.

The planned share sales could fetch US$2.17 billion at current market prices. The official did not say when the shares would be sold.

The proceeds from the asset sale programme are critical for Finance Minister Arun Jaitley's plan to narrow the fiscal deficit to 3.9 per cent of gross domestic product in the 2015/16 fiscal year that began in April.

So far, the government has only raised about US$250 million, after offloading a 5 per cent stake in Rural Electrification Corp last month.

Targets for revenue from partial privatisations have been missed for the past five years, so this year the government aims to spread the stake sales out rather than bunch them up towards the end of the fiscal year, as normally happens.

However, a sell-off in Indian shares could pose a challenge for the asset sale programme.

India's NSE index has fallen as much as 12.3 per cent from the record high hit in March amid worries over the slow pace of reforms as well as a controversial tax imposed on foreign investors.

Still, Aneesh Srivastava, chief investment officer at IDBI Federal Life Insurance, expects the share sales to get a good response if priced right. "Pricing is key for divestment," he said. "At the right price, these issues should go through." NTPC shares were down 3.1 per cent at 137.25 rupees, underperforming a 0.8 per cent gain in the broader NSE index . The government owns nearly 75 per cent of the power company.

Indian Oil Corp shares were flat at 332.30 rupees. The Indian government holds about 69 per cent.