New support for UPA may spur asset sales: WSJ

July 12th, 2008 - 9:55 pm ICT by IANS  

A file-photo of Manmohan Singh

New York, July 12 (IANS) Now that the United Progressive Alliance (UPA) government has found support from the Samajwadi Party, replacing Left parties opposed to the India-US nuclear deal, it could renew efforts to further liberalise the economy and spur plans to sell stakes in state-owned companies including Air India, the Wall Street Journal says. Divestments that could run into billions of dollars would give the Manmohan Singh government the revenue needed to fight a budget deficit that is widening to shield consumers from rising global oil prices, it said.

Sales could include stakes in or assets held by power company National Thermal Power Corporation (NTPC), besides the national carrier Air India, the Journal said Saturday.

“The government faces a huge fiscal gap in the face of the mounting subsidies bill,” Mridul Saggar, chief economist at Kotak Securities, told the business daily. “Without the Leftists, the government is better-placed to push through its divestment programme.”

But major policy initiatives, such as allowing more foreign investment in the retail, insurance and pension sectors, are unlikely as elections are due by May 2009 and could come as early as the end of this year. Labour unions, backed by some political parties that remain in Manmohan Singh’s coalition, will oppose any privatisation move, fearing job losses, the business daily said.

“The government will tread cautiously ahead of the polls and won’t disturb the electoral base,” G.V.L. Narasimha Rao, managing director of New Delhi-based political think tank Development and Research Services, was quoted as saying.

Manmohan Singh, the architect of India’s economic reforms, may yet be able to press on with privatisation after securing the support of the pro-business Samajwadi Party who replaced Leftists who withdrew their backing from his coalition last week.

The Journal has reckoned that putting a 4.75 percent stake in NTPC, India’s biggest power-generating company by capacity, on the block alone could fetch as much as $1.53 billion. The government has been toying with the idea of selling a tiny slice of its 89.5 percent NTPC stake to test investors’ interest in power stocks in a country starved of electricity.

The Left opposed the sale, claiming it would diminish the state’s role in managing NTPC, which reported a net profit of Rs.74.7 billion on revenue of Rs.386.35 billion last fiscal.

An emboldened government could also push ahead with plans to sell 15 percent of Air India. The government-owned carrier, which loses an estimated Rs.1.3 million a day, is reportedly seeking a Rs.23 billion bailout, the Journal said.

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