The sources further said that selling remaining 29.5% residual stake in Hindustan Zinc, which is now controlled by Anil Agarwal's Vedanta Resources, is expected to fetch about Rs 15,000-20,000 crore.
In this year's Budget, government had set a target of raising about Rs 55,000 crore from disinvestment. Of this, Rs 40,000 crore was estimated to come through part-sale of stake in public sector firms and Rs 15,000 crore from selling residual stakes that government holds in some firms, including Hindustan Zinc and Balco.
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"There was a broad consensus with the Finance Ministry's views on HZL stake sale issue in the last week's meeting chaired by the Prime Minister that stake sale in Hindustan Zinc should happen through the auction route. A formal Cabinet note on the matter will be circulated soon," a source said.
Earlier, the Finance Ministry had opined that Hindustan Zinc is no more a public sector company and selling shares through auction route does not require Parliament nod, while responding to the draft Cabinet note of Mines Ministry.
This view, however, was in contrast to those of Mines Ministry. The Law Ministry had also supported the Mines Ministry that selling residual stake in the zinc producer will require Parliament nod as it was incorporated through a statute.
Currently the government holds 29.5% stake in Hindustan Zinc Ltd (HZL) and 49% stake in Bharat Aluminium Company (Balco). Majority stake in the two erstwhile PSUs was sold to Vedanta group during 2001-2003 by the then NDA government.
Current market valuation for remaining government stake in HZL is about Rs 16,000 crore. However, valuation of Balco has been a bone of contention and a case is pending in Delhi High Court on exercise of call options (that allows a company to acquire additional shares at a later stage) by Vedanta.
Last month, Vedanta chairman Anil Agarwal had said that Vedanta has received positive "indications" from government on the matter and it may happen soon.
"We are getting the indications but it is a democratic process. Sometimes it gets delayed but it will happen," Agarwal had said.
The company, which maintains that selling of residual stakes by the government is merely a "housekeeping" work, has been trying for long to acquire remaining stakes in the two firms for having a total control.
In October, Vedanta had renewed the shareholders nod for making offers to the government upto rupee equivalent of $3.482 billion (or Rs 21,637 crore) for acquiring remaining shares in the two firms.
The upper ceiling is nearly 40% increase of Vedanta's January, 2012 offer of Rs 15,493 crore.
If the company makes the offer at that level (Rs 21,637 crore) for HZL's remaining stake, it would help the government meet over 39% of the Rs 55,000 crore disinvestment target for the current fiscal.
Besides, it will be over 144% of targeted Rs 15,000 crore by the government from residual stake sales for the fiscal.
Meanwhile, Finance Minister P Chidambaram has recused himself from the decision of selling stakes in the two erstwhile PSUs due to his past association with Vedanta and Law Minister Kapil Sibal has been entrusted the responsibility to represent Finance Ministry on the matter.
Currently, Hindustan Zinc is the richest profit-making subsidiary of Vedanta and had cash and cash equivalent of Rs 23,632 crore as of September, 2013. For the half year ended September, 2013-14 fiscal, it has reported net profit of Rs 3,300 crore and revenues of Rs 6,460 crore.