The government is scrambling to put together a 'Plan B' to raise even a fraction of its Rs62,000 crore ($10 billion) target from asset sales or disinvestment, according to a Reuters report citing unnamed officials.
Among the moves on the cards is a stake sale Indian Oil Ltd.
Prime Minister Narendra Modi's government needs to complete some major deals to deliver on a budget promise to trim the fiscal deficit to a seven-year low by the end of the year in March.
Pressure on the government increased with the Reserve Bank of India's surprise move on Thursday to cut interest rates, placing the onus on the government to help revive the economy by putting public finances on a firmer footing.
According to the report, an official in the finance ministry's department of disinvestment said on Friday the government was now considering putting other assets on the block, including 10 per cent of IOC, worth $1.3 billion (Rs8,060 crore) at current market prices.
At the top of the sell-off list are Coal India Ltd (OIL) and Oil and Natural Gas Corp (ONGC), in which the government plans to sell 10 per cent and 5 per cent respectively - stakes that are together worth around $6.3 billion (Rs39,060 crore) at current prices.
But demand has been lukewarm, not least due to plunging oil prices and questions over ONGC's share of fuel subsidies.
"Disinvestment is a major concern. This year again we are likely to fall well short of the target," another government official said.
A sale of IOC, in which the government owns nearly 69 per cent, could be more welcome in the market than either ONGC or Coal India, where fund managers want clarity on coal output targets, and on the amount of subsidies ONGC will need to pay.
India subsidises some types of fuel, sharing the cost between the government and upstream companies. The percentage each pays is decided quarterly, but investors would prefer a fixed formula, which would make profits easier to forecast.
"In the case of IOC, it is mainly a domestic retailer and has a lot to do with the domestic economy. The fall in crude prices and the government decision not to charge an oil subsidy will make IOC a better choice in the current environment," the official reportedly said.
Several officials have said the government is highly unlikely to hit its divestment target by 31 March. To date, it has raised just over $300 million (Rs1,860 crore), including the December sale of 5 per cent in steelmaker Steel Authority of India (SAIL).
In the past, government share sales that have met with little institutional appetite have been rescued by state-owned Life Insurance Corporation of India, India's largest equity investor. A substantial participation from LIC again could raise questions over how far the sales are simply ticking an accounting box.
State-owned insurer LIC took almost three-quarters of the shares in SAIL sold by the government in December - a move that economists say merely resulted in LIC's cash kitty being transferred to the government.