According to finance ministry sources, merchant bankers have already advised the government against the domestic issue. And now with the sudden downswing in the stock markets witnessed on Monday, it might not be possible to go ahead with the planned disinvestment at this juncture.

Although merchant bankers had advised the government to look to foreign markets for offloading shares of blue-chip public sector companies, sources said that option, too, does not seem feasible for now because of the state of the markets abroad. Even for the GDR issue, the government may have to wait for the markets to improve and decide on the timing some time after the Christmas and New Year holidays.

Both markets not being conducive to fresh issues, the government's strategy of disivnestment through common book-building will again have to bepostponed to a later date. The final decision, however, will be taken after the return of the senior officials of the finance ministry, who--including minister Yashwant Sinha and secretary Vijay Kelkar--are in Washington to attend the International Monetary Fund-World Bank annual meeting.

The government, as per the budget, is required to mop up Rs 5,000 crore from disinvestment of shares in four identified companies: Container Corporation of India (Concor), Gas Authority of India Limited (Gail), Indian Oil Corporation (IOC) and Videsh Sanchar Nigam Limited (VSNL).

Initially, the government had decided to start the disinvestment process in September. The determination of the government to start offloading the shares to fulfil the budgetary target notwithstanding, it failed to initiate the process because of the adverse market conditions and criticism of the Disinvestment Commission in trying to offer family silver to foreigners at a discount. The commission had suggested that, if at all a discount were tobe offered, it should be to the domestic investors.

The government then decided to offer the shares through common book-building, under which both the domestic and foreign financial institutions would be allowed to quote their price for the shares. Thereafter, the shares were to be offered to retail investors at a discount.

The process was slated to begin with the opening of books in Mumbai. The first public-sector company selected for testing the waters was Container Corporation of India. This was to be followed by Gail, IOC and VSNL, though not in that order. It was argued that the process would help the government offloading the shares at the best available price whether in the domestic or foreign market.

However, subdued conditions in both the markets and adverse advice from merchant bankers prompted the government to keep the disinvestment plan on hold. Now with the Unit Trust fiasco which resulted in plummeting of the BSE Sensex by about 224 points on Monday, the conditions moved from bad toworse. The other fear is that the cash strapped Unit Trust, one of the major buyers of PSU shares, will not be able to spare funds for fresh equity. Amid these conditions, it would be almost impossible for the government to enter the domestic market.

It might take more than a month for the domestic market to recover from the Unit Trust debacle fiasco. Meanwhile, the Christmas and New Year celebrations would begin in Europe forcing the government to postpone the common book-building to some time in January.