The government expects revenue collection to fall short of the budgetary target by 5-7%, mainly because of subdued growth in direct taxes.
The government is considering diluting its 11.7% stake in Axis Bank it holds through the Specified Undertaking of the Unit Trust of India (SUUTI) to meet shortfall in disinvestment proceeds and revenue collection during the current fiscal.
"There are various options being considered, including seeking a higher dividend from cash-rich central public sector enterprises (CPSEs) and dilution of stake in Axis Bank," sources said.
"All these are on the table as the fiscal deficit target of 3.9% of GDP for the current fiscal is sacrosanct," they added.
However, sources said no final decision has been taken so far on any of the options yet.
At the current market price, the government could raise about Rs 11,240 crore by selling 27.48 crore shares.
The Axis Bank stock was trading at Rs 412.15 per share, up Rs 2.80 or 0.68% higher.
SUUTI currently holds 11.7% stake in Axis Bank after selling off 9% stake in the lender in March 2014, which helped mobilise Rs 5,500 crore.
The government expects revenue collection to fall short of the budgetary target by 5-7%, mainly because of subdued growth in direct taxes.
Total tax revenues are likely to be around Rs 14 lakh crore in the current fiscal as against the budget estimate of Rs 14.5 lakh crore.
Besides, there are fears that the government may not meet its disinvestment target as the Finance Ministry is staring at a shortfall of Rs 50,000 crore.
The government had budgeted to raise Rs 69,500 crore via disinvestment of PSUs in the current fiscal.
Of this, Rs 41,000 crore was to come from minority stake sale in PSUs and another Rs 28,500 crore from strategic stake sale.
However, with volatile stock markets, the government has been able to mop up Rs 12,700 crore through stake sale in four PSUs - Indian Oil, REC, PFC and Dredging Corp.
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