India revives sell-off drive as deficit clock ticks

By Rajesh Kumar Singh

NEW DELHI (Reuters) - India invited bids from bankers on Wednesday to manage the sale of a 10 percent stake in iron ore miner NMDC, trying to revive a $10 billion asset sales programme and narrow the fiscal deficit to a seven-year low.

Barely two months before the end of the financial year, Prime Minister Narendra Modi is racing against time to raise even a fraction of the target, a centrepiece of his promise to trim the deficit to 4.1 percent of GDP.

To date, he has managed to garner just over $300 million from asset sales. The NMDC share-sale could fetch $893 million at current market prices, ahead of the government's first full year budget that will be presented on Feb 28.

New Delhi owns an 80 percent stake in the miner. The company's shares ended 1.8 percent lower at 138.20 rupees on Wednesday. The stock had gained 2.1 percent last year, but is down 4.7 percent since the beginning of 2015.

The move to sell shares in the company comes on day when the federal cabinet is due to decide the sale of a 10 percent stake in state-run refiner Indian Oil.

The stake in IOC is valued at $1.3 billion at current prices. The company's shares gained 55 percent last year. However, they closed down 2 percent at 330.05 rupees on Wednesday.

The government was primarily banking on Coal India and Oil and Natural Gas Corp (ONGC), in which it has been trying to sell stakes of 10 percent and five percent respectively, to come closer to the target.

The stakes in the two companies are worth around $6.3 billion at current prices, but the sales have been stalled by opposition from labour unions, plunging oil prices and questions over ONGC's share of fuel subsidies.

This has forced the eight-month-old administration to scour for different options to achieve the budgeted deficit goal, including alternative asset sales and deeper spending cuts.

(Reporting by Rajesh Kumar Singh; editing by Keith Weir)