By Nigam Prusty
NEW DELHI (Reuters) - The government has approved the sale of shares in state-run oil refiner Indian Oil Corp
New Delhi will sell a 10 percent stake in the oil refiner and 5 percent 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 $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 percent of gross domestic product in the 2015/16 fiscal year that began in April.
So far, the government has only raised about $250 million, after offloading a 5 percent stake in Rural Electrification Corp
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.
The Nifty has fallen as much as 12.3 percent 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 percent at 137.25 rupees, underperforming a 0.8 percent gain in the broader Nifty. The government owns nearly 75 percent of the power company.
Indian Oil Corp shares were flat at 332.30 rupees. The government holds about 69 percent.
(Additional reporting by Abhishek Vishnoi in MUMBAI; Writing by Rajesh Kumar Singh; Editing by Rafael Nam and Alan Raybould)
