India's government plans to announce the sale of a 10 percent to 15 percent stake in state-run Life Insurance Corp, the country's biggest insurer, in next week's federal budget, as part of a privatisation push to improve public finances, two government sources said.
Finance Minister Nirmala Sitharaman's plans to divest government control of large companies such as Air India and Bharat Petroleum Corp Ltd failed to make much headway in the current fiscal year because of the pandemic.
Now the government is renewing its drive to sell stakes as it tries to shore up revenues following the deepest economic contraction in decades.
One of the sources said the government will enact changes to a parliament law governing LIC, which has assets under management amounting to over $400 billion.
"To facilitate the sale of government stake in the LIC, the government will get a parliament approval to amend the LIC Act," the first source said.
The government had announced plans to sell its stake in LIC last year. That got delayed by legal and administrative hurdles, the official said.
Sitharam will present the 2021/2022 budget on Monday. The government also plans sales in stakes in IDBI Bank, Central Bank of India and Punjab & Sind Bank, a second source said.
Together, the plan is to raise 2.5 trillion to 3 trillion rupees ($34 billion to $41 billion) in the next financial year, officials said, partly to set off the shortfall in the proceeds this year.
They spoke on condition of anonymity because they are not allowed to discuss budget plans with media.
A finance ministry spokesman was not immediately available for comment.
Aiming to boost lending in the economy and improve the valuation of state-run banks before selling stakes in them, the government could announce creation of a bad bank, where toxic assets of banks worth billions of dollars would be transferred, the source said.
The objective is to park bad assets of state-run banks into the proposed bad bank and later sell those assets at a discounted price in the market, the official said.
"It will help clean up balance sheets of the banks and improve their valuation."