India has approved the sell-off of the country's largest auto maker, Maruti Udyog.

The government, launching its privatisation programme for this financial year, said it would hand over a majority stake in Maruti to joint venture partner, Japan's Suzuki Motor.

India's cash-strapped government hopes to raise 120bn rupees (�1.67bn) from privatisations this year.

No decision was made on the sale of another key privatisation, the country's second-biggest petrochemicals producer, IPCL.

India has repeatedly missed privatisation targets because the process has been plagued by political and union opposition.

But the programme was revived in February after the government approved the sale of giant telecoms and oil firm.

The deal

Maruti, of which the Indian government holds 49.74% and Suzuki 50%, controls about one third of India's 600,000 unit new car market.

Disinvestment Minister Arun Shourie said 4.2% of Maruti would be sold to Suzuki for 4bn rupees (�56m) plus a 10bn rupees premium for passing on the majority stake.

Mr Shourie said the government would reduce its stake in Maruti to 25% through a share flotation by March 2003, with the remainder being sold by March 2004.

Auto outlook

Maruti revolutionised India's antiquated auto industry when its first car rolled off the production line in 1983.

It has faced increasing competition over the past four years from Hyundai, Fiat, Ford and local firm Tata Engineering and Locomotive, seeing its market share fall from more than 80% in 1998.

The sale is not expected to have any significant changes at Maruti since Suzuki already "runs the show" at the company's car plant on the outskirts of New Delhi, a Maruti official said.

For Suzuki, the privatisation will allow the carmaker to consolidate Maruti's financials in its own income statement, boosting its revenues and market valuation.