Daijiworld Media Network - New Delhi

New Delhi, Jan 28: Finance minister Nirmala Sitharaman in the upcoming federal budget is likely to announce the sale of 10-15 per cent stake in the state-run Life Insurance Corp, India's biggest insurer. This move is a means to improve public finances with the way of privatisation, sources in the government stated.

Sitharaman plans to divest government control of large companies such as Air India and Bharat Petroleum Corp Ltd that failed to make much headway in the current fiscal year because of the pandemic.

Now the government is renewing its drive to sell stakes with a hope to draw in revenues following the deepest economic contraction in decades.

Meanwhile, one of the sources said the government will enact changes to a parliament law governing LIC, which has assets under management amounting to over USD 400 billion.

Reportedly, the plans to sell stake in LIC were already done in the year 2020. However, the process was delayed due to legal and administrative hurdles, the official said.

The government also plans to sell stakes in IDBI Bank, Central Bank of India and Punjab & Sind Bank, sources said.

The finance ministry plans to raise 2.5 trillion to 3 trillion rupees (USD 34 billion to USD 41 billion) in the next financial year, partly to set off the shortfall in the proceeds this year, officials said.

With hopes to boost lending in the economy and improve the valuation of state-run banks before selling stakes in them, the government could announce the creation of a bad bank, where toxic assets of banks worth billions of dollars would be transferred, the source said. The objective is to park bad assets of state-run banks into the proposed bad bank and later sell those assets at a discounted price in the market, the official said.

"It will help clean up balance sheets of the banks and improve their valuation."

The finance minister will be presenting the budget for 2021/2022 on Feb 1.