News / Asia

India to Sell Stakes in Some Public Sector Firms

India is selling stakes in two state-run mining firms as part of plans to raise billions of dollars from the sale of public sector companies.

The government says it will sell 10 percent of its stake in the world's largest coal mining company - Coal India Limited, and 20 percent in another mining firm, Hindustan Copper Limited. This will help the government raise more than $3.5 billion, which will be targeted for social programs.  

The government is also identifying other state-owned companies for which it will sell part of its stake. Over the next five years, the government plans to sell stakes in 60 firms to raise billions of dollars.  

Economist D.H. Pai Panandiker, who heads the independent RPG Goenka Foundation in New Delhi, said the money raised from privatization of state-owned firms, or disinvestment as it's called in India, will help pay for a number of much-needed projects.  

"We are short of infrastructure, we are short of electricity, highways, ports and so on. So that money which is coming from disinvestment can be put to more productive use," said Panandiker.

Under a socialist plan in the 1950's, the Indian government established a variety of companies spanning sectors from oil and mining to hotels and telecommunication.  Efforts to privatize these companies began in 1991 after India embarked on an ambitious economic reform program.  But opposition from communist parties and workers unions stalled any significant progress.   

The privatization program got momentum last year after the Congress-led coalition secured a larger-than-expected victory and no longer needed to rely on the support of leftist parties to stay in power.

Economists hope the sale of stakes in state-owned companies will signal a larger program of economic change. Foreign investors, who want to benefit from India's growing economy, have been urging the government to allow more foreign investment in sectors such as retail and insurance. They also want the government to revise rigid labor laws that make it difficult to fire employees.

But economist Panandiker observed these areas continue to be politically sensitive.

"Labor reforms are probably the most difficult. I don't see any progress on other fronts."

India is Asia's third largest economy and is rapidly returning to the high levels of growth before the global financial crisis.

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