The Indian government is considering putting the sale of its stake in Hindustan Zinc on hold, according to a source familiar with the matter. The move comes amid concerns over the impact of the COVID-19 pandemic on the country's economy and the mining sector.
Hindustan Zinc, which is India's largest zinc producer and a subsidiary of Vedanta Limited, is one of the government's key assets. The government currently owns a 29.5% stake in the company, which it had planned to sell to help shore up its finances.
However, the source, who spoke on condition of anonymity, said that the government was now considering delaying the sale due to the ongoing economic uncertainty caused by the pandemic. The decision would be in line with other governments around the world that have put asset sales on hold in order to conserve cash and avoid selling assets at a depressed value.
The sale of the government's stake in Hindustan Zinc had been planned for some time, with the government hoping to raise around $2.8 billion from the sale. The proceeds would have been used to help reduce the country's fiscal deficit and fund social welfare schemes.
However, the pandemic has had a severe impact on India's economy, with GDP contracting by a record 23.9% in the second quarter of 2020. This has led to concerns over the impact of the pandemic on the mining sector, which has been hit hard by falling demand and lower prices.
The government's decision to put the sale on hold will be seen as a setback for Vedanta Limited, which had been hoping to increase its stake in Hindustan Zinc through the sale. However, the company is expected to continue to pursue the acquisition of the government's stake once economic conditions improve.
In conclusion, the Indian government's decision to put the sale of its stake in Hindustan Zinc on hold is a reflection of the ongoing economic uncertainty caused by the COVID-19 pandemic. While the move will be seen as a setback for Vedanta Limited, it is likely that the company will continue to pursue the acquisition of the government's stake once conditions improve. The sale of the stake would have provided much-needed funds for the government, but the delay is a prudent move given the current economic climate.
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