Disinvestment in Indian Oil Corp and Oil & Natural Gas Corp
New on divestment map: 5% in ONGC, 10% in IOC
Amitav Ranjan / The Indian Express
The disinvestment roadmap is being altered to include sale of 10 per cent government equity in Indian Oil Corp and 5 per cent in Oil & Natural Gas Corp to raise Rs 20,000 crore in the current fiscal year for the National Investment Fund, currently used for social spending. Following a letter from Disinvestment Secretary Sumit Bose, the Petroleum Ministry is preparing the proposal for Cabinet approval, said sources. On August 2, Bose wrote to the Ministry to initiate the disinvestment process in both firms so that the proceeds could be garnered this fiscal. According to the roadmap, IOC would be the first to be disinvested but only after it makes an initial public offer of 10 per cent or nearly 24 crore shares to raise Rs 9,500 crore for part-financing its capital expenditure programme estimated at Rs 75,000 crore. This would be followed by sale of 10 per cent government holding amounting to 19 crore shares to raise Rs 7,600 crore for the NIF. Government equity, after the two-step sale, in the refining-cum-marketing firm would drop to 64.57 per cent from current 78.92 per cent, said IOC officials. Next in line would be ONGC with a disinvestment of 5 per cent or 10.7 crore shares to raise about Rs 12,840 crore at the current market price of Rs 1,200 per share. The government currently holds 74.14 per cent in the oil major.
The inclusion of oil heavyweights in the roadmap follows the recent reforms in the petroleum sector such as increase in kerosene and LPG prices, market benchmarking of petrol and diesel prices, raising consumer price of natural gas and more time for exploration firms under the rig holiday scheme. Without these, both companies had said last March that their shares would not fetch the right price. Bose’s letter reminded the Ministry of the assurance the latter gave early this year and said that since the reform exercise had taken place, the proposals for the Cabinet be readied soon as it takes 4-6 months for the entire disinvestment process to be carried out. He has suggested that IOC conduct an IPO followed by the disinvestment.
Affirming Bose’s view, IOC’s acting chairman BM Bansal has written to the Ministry that the “decontrol has improved the investor sentiments” and IOC shares had breached the Rs 400-mark following price reforms in June. But he wants the IPO to follow the disinvestment. ONGC, said its officials, was awaiting the government decision on the subsidy-sharing mechanism under which it partly funds the state-run oil marketing companies for their losses on account of selling petrol, diesel, kerosene and LPG below market levels.
The UPA government last November allowed a one-time exemption to use disinvestment proceeds in the NIF for meeting the capital expenditure requirements of selected social sector programmes until March 2012 due to “a reduced budgetary resource generation possibility”. The Department of Disinvestment, said sources, was unsure of meeting this year’s target of Rs 40,000 crore through share sale of the public sector enterprises announced so far for disinvestment. Last year, it managed to raise little over Rs 25,000 crore from part sale of Oil India Ltd, NHPC, NTPC and REC.
