The UPA government is considering proposals to divest up to 10 per cent stake in Bharat Heavy Electricals Ltd (BHEL), minister of heavy industries Vilasrao Deshmukh said today.
Shares of the company rose on stake sale prospects and on reports that the state-run power equipment major would sign agreements with various state governments and foreign companies for power projects.
Deshmukh added that the stake sale was under active consideration but no final decision had been taken. He said that in principle the government was not opposed to disinvestment.
Another company that is being considered for disinvestment is the loss-making Tide Water Oil (India) Ltd - in which the government holds 26.2 per cent through unit Andrew Yule & Co Ltd - and Tyre Corp of India.
The 10 per cent BHEL disinvestment had been first proposed in 2005 but had to be shelved following opposition from the communist parties on which the government was dependent for support.
A joint venture agreement between BHEL and Madhya Pradesh Power Generation Co to set up a 1,600 megawatt super critical plant is likely to be signed within the next three months. BHEL is also expected to sign a pact with Siemens AG for technical collaboration for steam turbines and generators, Deshmukh said.
"BHEL and Gujarat State Electricity Generation Co would also sign a pact to build another 800 MW super critical thermal power plant," he said.
BHEL currently has a manufacturing capacity of 10,000 MW per year and has plans to raise it to 15,000 MW by December and further hike it to 20,000 megawatts by March 2012.
Shares of the public sector power equipment manufacturer rose 2.8 per cent to Rs2,090.50 on the Bombay Stock Exchange as compared with the benchmark index that rose 1.8 per cent.
The ministry was also seeking extension of a scheme that allows incentives to state governments to procure new buses by six months.
Deshmukh said the demand for extension of the scheme had come in the wake of the vehicles segment experiencing sluggish market conditions. The scheme that was part of the second fiscal stimulus was set to expire by the end of the month.
According to analysts, BHEL disinvestment may be the government's biggest offering since the ONGC's $2.4 billion divestment in March 2004 and may lead to revival of a federal asset plan aborted by the government's erstwhile communist allies. The new government is seeking funds to fulfill election promises of supplying food at lower prices and higher government spending on health and education, they say.
They point out that BHEL is a high valuation company and the government can easily divest 10 per cent of its stake.
The government has plans to add 13,000 MW of new capacity every year, president Pratibha Patil had told lawmakers on 4 June. According to the Central Electricity Authority Indian needs additional power capacity to cut peak-hour shortages that may rise to 12.6 per cent.