Move to sell stake in IOC, ONGC

NEW DELHI NOV. 6. The Union Government is considering a proposal to divest 10 per cent equity each in Indian Oil Corporation (IOC) and Oil and Natural Gas Corporation (ONGC), a move that could net as much as Rs. 12,000 crores for the exchequer.

The idea had been floated by the oil companies but is now finding favour with the Finance Ministry, which is searching for ways to bridge the fiscal deficit following the halt to disinvestment of the Hindustan Petroleum Corporation (HPCL) and Bharat Petroleum Corporation (BPCL).

Highly placed sources, however, say the proposal will have to be formally initiated by the Disinvestment Ministry, which is the nodal agency for all privatisation of public sector companies. Besides, they point out that the Cabinet Committee on Disinvestment (CCD) had last month directed the Disinvestment Minister, Arun Shourie, to examine the prospect of divesting equity in IOC to compensate for the revenue loss due to the failure to disinvest HPCL and BPCL. This was in the wake of the Supreme Court ruling that parliamentary approval is needed for privatisation of these two companies. Initially, Mr. Shourie had proposed that the marketing arm of the IOC could be hived off, but this has met with considerable opposition both from within the industry and the government.

The proposal now on the anvil envisages two ways to mobilise the resources needed to make up for the loss of Rs. 13,000 crores expected from the disinvestment process. The first could be to divest 12-15 per cent equity in the Fortune 500 company IOC alone while the second could be to tap both IOC and ONGC by divesting 10 per cent equity stake in both companies.

The first option could raise about Rs. 6,000 crores while the second would enable about Rs. 4,000 crores to be raised from the sale of IOC equity and over Rs. 8,000 crores from the sale of ONGC shares. Industry sources say the second option would amount to Rs. 12,000 crores, sufficient to meet the needs of the Finance Ministry.

Much depends, however, on the reaction of the Disinvestment Ministry which has another 7-8 weeks to submit its proposals to the CCD which had given it three months time to formulate a scheme on these lines. The other two options proposed by the CCD at its meeting on October 3 were to seek a judicial option or to consider a political consensus on the issue of privatising HPCL and BPCL.

On this issue, Petroleum Minister, Ram Naik, told The Hindu that his ministry would examine the proposals submitted to it by the Disinvestment Ministry.

He denied reports of his opposition to disinvestment in the oil sector and pointed out that Rs. 7,000 crore worth of government shareholding had been divested from the oil sector during his tenure. "We have been cooperating in discussions on disinvestment," he said.

As for another proposal regarding the sale of cross-holdings by IOC and ONGC, industry sources say this would not meet the government's requirement at this stage for funds.

Selling off equity held by IOC in ONGC and vice versa might raise a substantial amount of resources, but these funds would accrue to the oil companies themselves. It would not yield funds to the exchequer immediately in contrast to the sale of government equity in the market. IOC, for instance, has 82 per cent government shareholding and can easily divest up to 15 per cent without any problem.