But despite the approval last weekend by the Bharatiya Janata Party (BJP)-led coalition of the partial sell-off of state crown jewels, Hindustan Petroleum Corporation Ltd and Bharat Petroleum Corporation Ltd, the road ahead still looks bumpy, economists say.

"The travails of coalition politics imply the (privatisation) programme can proceed only at a slow pace and in a piece-meal fashion," Standard Chartered economist Kishlaya Pathak said.

Also the government still faces opposition to privatisation from labour and critics who charge that jobs are being cut to woo buyers for firms and that some assets have been sold too cheaply.

After several months of internal feuding over the pace of privatisation, the government said on Sunday it would sell a 34 percent stake in Hindustan Petroleum to another company. It will also sell 35 percent of Bharat Petroleum to the public through domestic and overseas listings.

The BJP, which heads the unruly 20-odd member ruling coalition "are trying to put their act together ahead of the elections," said T K Bhaumik, economist at the Confederation of Indian Industry. "They'd like to go to the people with a good report card."

Analysts say the BJP's December landslide win in a crucial poll in Gujarat, scarred by religious riots, gave it the confidence to take politically tough decisions such as  privatising the oil firms.

The party fought the election on a hardline Hindu plank.

"After the win in Gujarat, there's a sense of getting back on track with (economic) reforms," said Surjit Bhalla, managing director at Oxus Fund Management." The party wants to show they have more to offer than Hindutva."

At the same time, some analysts say the government had little choice left if it wanted to show voters it could manage the economy.

Still at Junk Levels

The government needs receipts from privatisation sales to bridge a yawning fiscal deficit that has kept the international rating of the world's 12th largest economy at junk levels and restricted the inflow of vital foreign investments.

"The government had few options with its fiscal compulsions (being) what they are and its reformist image scarred a bit, it could not let the political rhetoric dictate the course," The Hindu Business Line said in an editorial on Tuesday.

But already there are signs of trouble.

In a replay of the labour opposition that has stalled sale of India's largest aluminium producer, National Aluminium Company Ltd, refinery workers have already flagged their opposition to the energy firms' sales.

"The day they ask for expressions of interest, all officers and unions will go on a flash strike. It will be indefinite till the government decision is reversed," Ashok Singh, president of Oil Sector Officers Association, vowed.

The group has 45,000 members and Singh said the protest will be supported by 20 unions representing 100,000 employees.

India has a huge array of around 230 state-owned companies, making everything from steel to condoms.

Although most make losses, any move to privatise them provokes howls from labour unions, political parties and parts of the bureaucracy.

India's privatisation drive, launched more than a decade ago, was slow to take off, but gained pace early last year under energetic privatisation minister Arun Shourie.

The government sold stakes in a giant telecom firm, an oil marketing firm and the nation's biggest carmaker but momentum ran down when ministers objected to the sale of the two oil firms and forced a delay.

The country set an ambitious target of raising Rs 120 billion through stake sales in state-run firms in the financial year to March 2003 but has admitted it will fall way short because of delays.

Global rating agency Standard & Poor's this month retained India's sovereign debt rating at junk grade, citing its high public debt as a key factor.