India scraps sales of state firms

NEW DELHI Wednesday (BBC) India's Congress-led coalition government has dropped plans to sell off 13 profitable state firms.

The plans to sell controlling stakes in the 13 - all of which are profitable - to strategic investors had been set in motion by the previous administration.

But pressure from leftist coalition allies means that Finance Minister Palaniappan Chidambaram has scrapped the idea.

Strategic stake sales were "not transparent", he said.

Sales of smaller stakes in the 13 might happen on a case-by-case basis, he said.

They include National Aluminium Company, Shipping Corporation of India, National Fertilizers and Hindustan Petroleum, a junior minister said.

A clause in a banking reform bill which would have cut the state stake in several banks to 33% from 51% has also been dropped.

The previous government, led by the Hindu nationalist Bharatiya Janata Party, had set the sell-off programme in motion to try to deal with India's chronic budget deficit of about 4-5% of gross domestic product. The current Congress Party-led administration of Prime Minister Manmohan Singh wants to use privatisation receipts to fund rural infrastructure projects.

In order to keep communist MPs in the governing coalition, Mr Singh has promised only to privatise loss-making firms.

The leftist MPs say they fear widespread job losses.

Earlier in August, a plan to sell 10% of profitable Bharat Heavy Electricals was also put on hold after criticism from communist MPs.