The Indonesian government has invited Tata Steel [Get Quote] and Arcelor Mittal to take part in the privatisation process through which the government is selling 35 per cent in PT Krakatau Steel.

Confirming this, sources said talks are at a preliminary stage. A spokesperson for Tata Steel, the world's sixth largest steel maker, said the company has not approached anyone to acquire a stake in Krakatau Steel.

The broad contours of the plan suggest that the government will dilute another 30 per cent through a public offer later.

The proposed privatisation plan is a part of the government's aim to scale up the country's annual steel production capacity to 10 million tonne in three years from 6 million tonne now. For this, the government wants Krakatau to increase its capacity to 4 million tonne from the existing 2.5 million.

Krakatau's previous privatisation plan, which was rejected by the government two weeks ago, did not include the IPO.

The new one will be finalised by December, they added.