Sinha faces a massive fiscal problem. The fiscal deficit is slated to cross the budget target of 5.6 per cent of GDP: rollbacks have skewed thebudget estimates of revenue; besides, indirect tax collections are lagging behind target. A shortfall in the PSU disinvestment target will send the fiscal deficit soaring beyond 6 per cent of GDP. Sinha must achieve the PSU disinvestment target. The markets are aware of his compulsion. But Sinha may not have meant that he will sell PSU shares at any price. What he perhaps had in mind was that the special purpose vehicle (SPV) will give him the needed Rs 5,000 crore. Under the arrangement, PSUs will borrow the amount from the market and lend it to SPV at zero interest. SPV will pay government in exchange for PSU equity. So far as the budget is concerned, it will have disinvested and garnered the targeted revenue. Thus, disinvestment will be neutral to market conditions (prices).

The marketing problem will be that of the PSUs. The shares held by SPV (non-government, but UTI-FI-PSU owned) will have to be sold at a higher price than that paid by SPV to the government. This realisation will go to the PSUs torepay borrowings and pay interest. SPV will have to judge how long to wait to realise an economic price. But SPV may not be in a position to hold out for long: this is because the interest cost of PSU borrowings will keep mounting. So sales at the going market prices could mean a loss - not for the government but for the PSUs. But that is a risk the PSUs will have to bear, since buying at today's prices could also mean a substantial gain.