The Cabinet Committee on Economic Affairs chaired by Prime Minister Manmohan Singh approved the stake sale in the firm, Finance Minister P. Chidambaram told media persons here.
The government currently controls 92.5 percent stake in RCF, a mini-ratna central public sector enterprise under the administrative control of the ministry of chemicals and fertilizers.
The stake sale will help government achieve Rs.30,000 crore disinvestment target for the financial year ending March 2013.
The RCF share price surged more than five percent after the stake sale announcement was made. RCF was trading 4.13 percent higher at Rs.57.95 at the Bombay Stock Exchange in late afternoon session Wednesday.
RCF is engaged in the business of manufacturing and marketing fertilizers, industrial chemicals such as methanol, methylamines, ammonium bicarbonate and ammonium nitrate from its two operating units at Trombay and Thal in Maharashtra.