The mines ministry had earlier accepted the Disinvestment Commission's recommendations that 40 per cent of the Centre's holding in the aluminium producing PSU be offered to a strategic partner. The strategic partner's shareholding was to increase to 74 per cent in the following two years.

Ultimately, the remaining 26 per cent of the government's stake was to be sold off too "at an appropriate time". The Disinvestment Commission subsequently recommended that the strategic partner be offered a majority stake of 51 per cent straight away.

The mines ministry began seriously considering the proposal following ahint of similar policy stance in the Union Budget. Union finance minister Yashwant Sinha announced that the Centre would only continue toretain a majority holding in PSEs "involving strategic considerations".

As a rule though, the "government's shareholding in public sector enterprises will be brought down to 26 per cent", he said. Finance secretary Montek Singh Ahluwalia first announced that a strategic sale of 51 per cent equity in Balco was being considered at the inauguration of the Euromoney Conference on Thursday.

At a workshop on the Indian mining sector at the conference on Friday afternoon, mines secretary B B Tandon confirmed that an offer of a majority stake in the Rs 861.23 crore-turnover company was being thought of. He said an inter-ministerial group had now been set up to select a global adviser for the strategic sale. A capital restructuring of the company is planned, to make the equity offer more attractive to a prospective investor.

"Besides creating the right environment for attracting private investment in this sector, the government has also taken the initiative to privatise and disinvest the existing public sectorundertakings in the mining and mineral sector," Tandon said. Disinvestment is planned in four mining PSUs, including Balco.

The Centre proposes to offload 30 per cent of its shareholding in Nalco partly through a global depository receipts (GDR) issue and partly through a domestic public issue, targeted at both institutional investors and small investors. The equity offer would come in the wake of capital restructuring that would convert half of Nalco's huge Rs 1,281 crore share capital into debt.

The conversion of some of Nalco's equity into long-term government loans is now being considered by the Union finance ministry. The Centre's stake in Nalco is at present roughly 87 per cent, the remaining 12.8 per cent equity having been divested in favour of 20,000 small shareholders.

Tandon said the mines ministry was looking at the Disinvestment Commission's recommendations on equity sales in Hindustan Zinc Ltd (HZL) and loss-making Hindustan Copper Ltd. The panel has proposed a 25 per cent disinvestment inHindustan Zinc, in which the government shareholding now is 76 per cent. Financial institutions, small investors and employees own the remaining 24 per cent of HZL.

The Disinvestment Commission has recommended two options for offloading government equity in Hindustan Copper, including a strategic sale of 51 per cent of the Centre shareholding. The mines ministry is yet to take a view on the proposals.

The mines secretary pointed out that the Centre had gone whole hog in liberalising the mining sector and overseas investors had responded by bringing in foreign direct investment. Between November 1995 and April 1998, the foreign investment promotion board (FIPB) has approved 46 foreign investment proposals worth $750 million in mining.

Last year mineral production went up by 4.5 per cent. The country produces minerals worth roughly $10 billion (Rs 43,000 crore) and contributes to roughly 3.5 per cent of the GDP (gross domestic product) and 11 per cent of the country's industrial production.

The workshopwas chaired by International Base Metal's mining analyst Larry Kaplan. Apart from Tandon, Rio Tinto India managing director Charles Lutyens, Videocon Power Limited advisor S K Grover and coal ministry advisor N Gautam, took part in the brainstorming on mining in India.