With this development, the government has three options to choose from to push through its Rs 5,000-crore disinvestment plan. The other two support mechanisms that are being discussed include the creation of a special-purpose vehicle to hold and sell government's equity and the floating of a special mutual fund that will enable institutions and banks to warehouse shares of public sector units.

The underwriting offer was made by IDBI chairman GP Gupta to finance minister Yashwant Sinha. According to sources, IDBI, along with select institutions and State Bank of India, is ready to underwrite the disinvestment programme provided the government agrees to "price the issues attractively". In effect, the institutions want the government to offer the navratna shares at a discount.

"The ministry is considering theSPV proposal, which is time-consuming. The second proposal--which involves the creation of a mutual fund--may not see a smooth sailing. This is so because if the market does not pick up, banks and institutions will be hit, and the net asset value of the units will go down. Comparatively, the underwriting proposal is more practical," an institutional source said.

According to the plan, the government can go public with the disinvestment plan with the underwriting cover, which will be prepared to take any amount of devolvement.

The finance minister had earlier stated that divestment of Concor shares-- which forms the first tranche of the disinvestment plan--will commence before the end of the month.

With hardly three weeks to go before the deadline, the idea of a mutual fund may not wort out at least for the Concor issue, sources said. Banks and institutions have been given three weeks to prepare the blueprint for the mutual fund plan.

Even the creation of a SPV to hold and sell the shares seems remotebefore the end of the month. The proposal is currently pending clearance from the group of ministers in charge of the disinvestment plan.

Underwriting the issue will not involve much time once the issuer and the underwriter agree on the pricing of the issue. Once this is done, even if the issue fails to generate investor support, the government's target will be met as the shares will devolve on the underwriting institutions.

Apart from the Concor issue, the other PSUs which are ready for disinvestment are Gas Authority of India, Indian Oil Corporation and Videsh Sanchar Nigam.

INSIGHT -- implementation will bode well

The SPV route and the underwriting offers by banks and financial institutions offer opportunities for the government to start the disinvestment process without waiting for more favourable share prices. The start of the process and investment of the proceeds in infrastructure will provide the much-needed kickstart to the economy. Disinvestment in the stronger companies will resultin the unlocking considerable value, which can then be used to fund infrastructure projects.