The finance ministry is looking at four or five big-ticket initial public offerings (IPOs)

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of major public sector undertakings to meet this year’s disinvestment target of Rs 40,000 crore, a top government official said. This would be a change of strategy as it had earlier lined up only follow-on public offerings (FPOs) to dilute its holding in PSUs.

“We have been asked to work on various options. The government can go for IPOs. It can go for four or five big IPOs. There are other options as well, like buyback of shares. Various options are being looked at... I don’t think we need to press the panic button at this stage,” the official, who is in the know of developments, told Financial Chronicle.

At least 25 major PSUs were identified for potential IPOs as early as 2009. They included Nuclear Power Corporation of India, SBI Capital Markets, National Bank for Agriculture and Rural Development, Exim Bank of India, Punjab and Sind Bank, Indian Railways Finance Corporation, UTI Asset Management, Ennore Port and Cochin Shipyards.

The government had also proposed selling a stake in Bharat Sanchar Nigam (BSNL). This is one company that alone can fetch at least Rs 40,000 crore through the IPO, but it is not clear if it can happen in the near future because of stiff opposition from workers.

The official said there is still time for the government to work out its strategy on disinvestment. It would wait till January to see if it needs to put in place a plan B to mobilise resources if it failed to realise the targeted disinvestment by March 2012.

Against the Rs 40,000 crore target, the government has mopped up only Rs 1,100 crore through disinvestment in Power Finance Corporation. Another major follow-on public offering, that of ONGC, has been put off repeatedly in view of volatile market conditions and it is not as yet clear when this may take place.

While the government has approved disinvestment in ONGC, SAIL, HCL and NBCC in financial year 2011-12, it has managed to mop up only Rs 1,162 crore so far through five per cent stake sale in the Power Finance Corporation. The ONGC issue can fetch at least Rs 12,000 crore while the SAIL issue can bring in about Rs 8,000 crore.

The government collected Rs 22,763 crore during the last financial year through sale of equity in public sector enterprises against the target of Rs 40,000 crore. The government deliberately chose to go slow as it had a revenue bonanza of Rs 1,06,000 crore from the auction of 3G and wireless broadband spectrum.

The official, who did not want to be named, said keeping deficit at the budgeted level of 4.6 per cent of GDP is a challenge, but it is certainly wrong to say there was a fiscal stress. Barring disinvestment and additional expenditure on account of oil subsidy, all other revenue collection and expenditure are on track.

“There is a fiscal challenge. I won’t call it stress. September expenditure figures have been very much in line. As a percentage of GDP, expenditure is comparable with last year,” the official said.

On oil subsidy, he said “every year we have this issue. Last year and the previous year we never provided (any amount for oil subsidy) in the budget, yet we made provision (meet the expenditure). This year we have provided Rs 20,000 on Oil subsidy we feel we will be able to manage by the overall savings in other expenditure.”

There would be additional requirement for oil subsidy and he quantum would at when the numbers are know, he said adding oil companies are in growth path because of higher global oil prices and “they are making huge profits.

Indicating oil producing companies like ONGC were in a better position to share the subsidy, the group of ministers would decide if they should be able to make higher than 33 per cent contribution to meet oil subsidy, he said.