Signalling that the prospects of market volatility in the backdrop of the euro zone crisis won?t hinder its disinvestment programme, the government on Tuesday set the stage for its biggest PSU stake sales yet by clearing the proposals for Coal India (CIL) and Hindustan Copper (HCL). Between them, stake sales in these two state-run mining companies are expected to garner about Rs 17,000 crore.

Budget 2010-11 had set a Rs 40,000-crore disinvestment target for the fiscal. A plan for selling government stakes in 10 PSUs had also been drawn up. Earlier this fiscal, the government raised Rs 1,000 crore from the initial public offer of Satluj Jal Vidyut Nigam.

With 3G-BWA spectrum auctions bringing a Rs 1 lakh-crore windfall, the government could aim at a sharper reduction in fiscal deficit to 4.5% of GDP as against the budgeted 5.5% if it meets the disinvestment target and fares well on tax revenues.

Centre will sell 10% stake through the IPO of CIL, the world?s biggest coal miner. A total of 20% stake in HCL will be offered through a follow-on issue: Fresh equity worth 10% of pre-issue paid-up capital and 10% to be diluted by the government.

After a meeting of the Cabinet Committee on Economic Affairs, home minister P Chidambaram said that both issues will be made within six months. While CIL is wholly owned by the government, its stake in HCL is 99.59%.

At a separate press conference, coal minister Sriprakash Jaiswal announced that the CIL issue will hit the market by September. The CIL and HCL issues are expected to garner Rs 12,000 crore and Rs 5,000 crore respectively.

Analysts feel that timing and pricing of the issues will prove crucial in deciding the actual proceeds. Details of both offers including the price band will be finalised by a group of ministers later, Chidambaram added.

The government has already appointed six merchant bankers ?Citigroup, Deutsche Bank, Morgan Stanley, Enam, Kotak Mahindra and DSP Merrill Lynch? to manage the CIL divestment.

CIL sources said the draft red herring prospectus would be filed by mid-July and the issue could hit the market in the first week of October. The price band could be such that post-listing, the investor would get a 10% appreciation.

Kejriwal Research and Information Services director Arun Kejriwal told FE: ?If the price is not as per market conditions, no matter what the government does, it is not going to garner enough. In fact, shares of HCL should be priced below the market rate. In the case of CIL, it is difficult to say anything in the absence of any data. We have to wait and watch.?

SMC Capitals equity head Jagannadham Thunuguntla said: ?Primary markets are not very exciting, given the current global conditions. But it?s always good to finish all the procedures early so that whenever the conditions become normal, the issues can be floated.? He said public issues of these companies now will leave enough time for the government to conform to the 25% public holding norms for PSEs.

The shares will be issued at a discount of 5% to retail investors and employees of the two companies. CCEA also approved reserving 1% equity for employees of CIL and its eight subsidiaries. The HCL scrip shot up 14% during the day and closed 9.1% up at Rs 513.35, while the benchmark 30-share Sensex rose 0.43%.

Last fiscal, the government had diluted stakes in several PSUs including navratna firms REC, NMDC and NTPC at discounted rates. However, retail investors and employees largely stayed off these issues, which finally garnered just above Rs 23,000 crore, below the targeted Rs 25,000 crore.

?Discounts have to be there in any case. Whether retail investors and employees will respond or not will depend on market conditions,? said an analyst.