"We have concluded first round of discussions which were largely informal. During this SMC was disinclined to buy government equity in MUL," official sources said.

Asked about the SMC's response during the discussions that began on November 30, sources said that the Japanese partner in MUL agreed in principle for government divesting its 50 per cent stake in the auto venture. The disinvestment ministry would now take a proposal for sale of government equity to the Cabinet Committee on Disinvestment (CCD) for its upcoming meeting on December 23. When contacted, Disinvestment Secretary Pradeep Baijal declined to comment on the talks with SMC saying that a formal proposal could be sent to the Japanese partner after CCD takes a decision on the subject. (PTI) Sources, however, said that SMC wanted the government to sell its equity to public.

They said that the move might not find favour with the government as it was unlikely to fetch the desired value for the state's equity.

SMC is also believed to have suggested to the government that it sell its stake to a new partner but put the condition that it be with the approval of the Japanese company.

SMC's justification for putting the condition was that government could not have a second strategic partner in MUL as the Japanese auto company was bringing in technology and new models from its stable to the Indian joint venture (JV).

A final decision on divestment of government's 50 per cent equity and other modalities are expected to be finalised at the next CCD meeting, to be presided over by the Prime Minister Atal Bihari Vajpayee.

The CCD, had in November, decided to constitute a committee of secretaries to explore all possibilities with SMC for optimal disinvestment in MUL.According to the terms of agreement of the JV both parties have to seek the written consent of the other party before effecting a change in the shareholding pattern in the company.

The government had proposed a number of options for disinvestment of its equity in MUL including sale of its share to the Japanese car company.A high level team of SMC had arrived in Delhi last month to hold discussions with government officials and explore the proposals for divestment in MUL.