Most economists were disappointed with the shallow emphasis on disinvestment in the Budget 2009-10. The selloff plan, they felt, was not strategically reassuring when the fiscal deficit was at a 16-year high. The Budget did not say how much the government would garner from PSU stake sales. Neither did it list the PSUs or draw the contours of a disinvestment strategy.

As the fiscal-end draws near, however, it?s reassuring that public offers of four PSUs would be completed this year. On the table are stake sales of National Thermal Power Corporation (NTPC), National Mineral Development Corporation (NMDC), Rural Electrification Corporation (REC) and Satluj Jal Vidut Nigam Ltd (SJVNL.)

Starting with the NTPC follow-on public offer on February 3 ? the government will dilute 5% stake in the power utility ? the four offers would whet investor appetite in India?s stock markets by March-end. The next fiscal will see other companies like Engineers India Ltd, Coal India Ltd, BSNL, Steel Authority of India Ltd, Manganese Ore India Ltd and Hindustan Copper, among many others, coming out with public offers.

There are 60 companies, listed and unlisted, that meet the criteria set out by the Union Cabinet for divesting government stakes in profit-making companies having positive net worth and no accumulated losses. Thirteenth Finance Commission chairman Vijay Kelkar has valued PSUs at $300-400 billion, while Morgan Stanley has pegged the valuation of unlisted companies at $144 billion.

The government could garner Rs 24,000 crore from disinvestment in this fiscal alone, just Rs 1,000 crore short of the Rs 25,000-crore annual target indicated in the Economic Survey 2008-09. This is no mean figure, which includes the money raised through Oil India and NHPC stake sales. Note that only Rs 1,120 crore was accounted for in the Budget 2009-10 as disinvestment proceeds.

The government is using method for stake sales to institutional investors, wherein investors would be free to bid at any price above the floor price and the allotment would be on a top-down basis. This would give retail investors an indirect discount.

NTPC, which generates 30,644 megawatts (or 20%) out of India’s total power capacity of 155,859 mw, expects to raise up to Rs 12,000 crore through the FPO. The government, which holds an 89.5% stake in NTPC, is selling 412.3 million shares or 5% of its stake in the offer. The auction method will be used for selling about 50% of the NTPC shares on offer to institutional investors.

As for NMDC, the government plans to divest 8.38% stake in the country?s largest iron ore producer, brining its stake down to 90% in the company, with the remaining 10% being sold to the public.

NMDC stake sale could prove the largest issue by value, estimated to generate about Rs 14,000 crore. NMDC has estimated cash reserves of around Rs 12,000 crore and has lined up expansion plans worth Rs 26,000 crore.

The government also plans to divest 5% in REC, raking in about Rs 3,500 crore. In SJVNL, a joint venture between the Centre and Himachal Pradesh, the Centre can raise about Rs 560 crore by diluting its stake by 10% to 65%.

Last Thursday, the Cabinet Committee on Economic Affairs approved a 10% follow-on public offer in Engineers India. The CCEA also decided that before the offer EIL will issue two bonus shares for every one share held and a special dividend of 1,000% of the paid-up equity capital. It also announced splitting one EIL share of the face value of Rs10 into two of the face value of Rs 5 each.

Indications are that the tenure of the current government would be marked by unprecedented levels of disinvestment. The realisation from this would indeed be huge. For a country with inadequate public resources to meet its developmental needs, the proceeds from PSU stake sales could be a bonanza. It is important that the government sets out a clear strategy on disinvestment and spell out what exactly it wants to do with the proceeds.