The Empowered Group of Ministers (EGoM) headed by Finance Minister, P. Chidambaram on Thursday approved the sale of IOC’s 10 per cent government stake to state-run Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL) which likely to garner Rs. 4800 to 5000 crore.

Coming out of the meeting, Petroleum and Natural Gas Minister, Veerappa Moily said that EGoM had in principle taken a decision for a block deal and the modalities for the same would be formulated shortly. The EGoM was left with no other option but to exercise the block deal option after the Petroleum Ministry strongly opposed selling of IOC shares in the stock market like other disinvestments.

Petroleum Secretary, Vivek Rae said the stake sale will happen in the next few days after the ONGC and OIL boards take a call on the issue.

ONGC chairman, Sudhir Vasudeva said most likely the 10 per cent stake will be split between ONGC and OIL euqually. ONGC already holds 8.77 per cent stake in IOC. ``The 5 per cent stake will cost us Rs. 2,200 to 2,300 crore and this amount will not have any bearing on our capital expenditure plans,’’ he remarked. OIL is sitting on a cash pile of about Rs. 8,000 crore.

``We feel that the share of IOC is grossly under-priced right now. And it commands more value. Normally, we would not want to do a block deal but we thought we should follow this route which would enable revenues to be raised,’’ Mr. Rae added.

Mr. Rae said there will be no lock-in period and both ONGC and OIL would be free to encash their shares anytime. ``We had wanted that there should be no lock-in period for selling off the shares and I think the EGoM has agreed to this. And this meets our concern,’’ he added.

The EGoM on January 9, 2013 deferred disinvestment of 10 per cent stake in IOC through an offer for sale on the stock markets owing to strong opposition from oil ministry. The Ministry felt IOC shares were way lower than the 52-week peak of Rs. 375 reached on January 18 last year.

The Finance Ministry had planned to sell 24.27 crore IOC shares to meet part of its Rs. 40,000 crore disinvestment target for current fiscal.

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