The Hindu Business Line : Unlocking oil PSUs' cross-holdings may get Cabinet approval soon

`All involved in the current exercise are in favour of unlocking the cross-holdings. However, there is still some room for determining the modalities to be adopted for the proposed unlocking of values.'

Kolkata , Dec. 19

THE issue of unlocking cross-holdings among three oil and natural gas PSU giants - ONGC, Indian Oil and GAIL - may receive an `enabling approval' shortly.

Submitted for Cabinet approval by the Union Petroleum and Natural Gas Ministry, the issue is currently awaiting the recommendations of the Group of Ministers.

Highly placed sources in IOC and ONGC told Business Line that while the "in-principle approval for disentanglement" is round the corner, the Government would take time before fixing the modalities.

"All involved in the current exercise are in favour of unlocking the cross-holdings. However, there is still some room for determining the modalities to be adopted for the proposed unlocking of values," sources said.

"We are expecting a decision in this regard by the end of this Parliamentary session."

At the insistence of the Government, the three oil majors had picked up each other's stakes in 1998. Accordingly, IOC has a 9.6 per cent stake in ONGC, which in turn holds 10 per cent in IOC. IOC and ONGC have picked up 5 per cent each in GAIL, while the latter is holding 2.35 per cent in ONGC.

The boards of both IOC and GAIL have already recommended dilution of their respective stakes in ONGC to finance their respective expansion plans.

To protect the interests of its existing shareholders, ONGC had first mooted the idea of a mutual buyback of holdings with IOC, preferably in tranches, which was rejected by the latter.

ONGC had then placed a fresh proposal before the Government for buying back IOC's 9.6 per cent holding in ONGC utilising its resources.

IOC expressed an interest in offering its 9.6 per cent stake at one go to institutional investors for better price realisation.

The Government, however, rejected the proposal and instead asked IOC to take ONGC into confidence before any such dilution of stake was made.

Sources, however, confirm that no such discussion has taken place till now between the two oil majors.

"We believe the Centre will soon take our view on the whole issue and we are working on some alternative proposals," ONGC sources said.