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The Finance Ministry has invited proposals from merchant bankers and brokers for offloading 10 per cent of its stake in oil marketing major, Indian Oil Corporation. Currently, the Government owns 68.57 per cent stake in the company.
Earlier this month, the Ministry had initiated inter-ministerial consultations for dilution of stake. Ministries have been asked to give their comment by January 27.
CCEA approval
After this, a final note will be prepared for the Cabinet Committee on Economic Affairs (CCEA) consideration for a final decision. The Government expects to get around Rs 8,000 crore through this sell-off and the effort is to close the transaction by March 31.
Once the CCEA clears it, the divestment will be carried out through the offer for sale (OFS) route, which requires little paperwork and can be completed within seven days.
Stake sale via OFS route
Recently, market regulator SEBI permitted the reservation of a minimum 10 per cent for retail investors besides the discount. This was used in the disinvestment of Steel Authority of India and will be used in future sell-offs, too.
Last year, too, the Finance Ministry had moved a proposal for a stake dilution in IOC through the OFS mechanism. But the nodal Ministry had opposed it saying shares should not be sold through OFS as the price did not reflect the right valuation of the company. Finally, it was decided to sell the stake through block deals.
Completing the divestment in IOC this fiscal is crucial as the mop-up via this route is well below target. Until now, the Centre has managed raising a little over ₹1,700 crore against the planned ₹43,125 crore. Despite the decision taken earlier, there is no clarity when the disinvestment in two big tickets sell – ONGC and Coal India will be taken up.
Subsidy-sharing formula
ONGC’s disinvestment programme is stuck due to an unclear subsidy-sharing formula. The explorer offers discounts to public sector marketing companies on its crude oil and petroleum products.
With a steep drop in international crude oil prices, the producer finds itself in a peculiar position, where the discount it offers is higher than the actual price.
ONGC’s produce is benchmarked to the Indian crude basket, which on January 13 stood at $43.48 a barrel. It has to give a discount of $56 a barrel on the crude price. The Government had initially intended offloading its stake in ONGC this month, but neither the company nor the Ministry of Petroleum and Natural Gas has heard anything as yet.
The issue of subsidy-sharing will need to be clarified even for Indian Oil disinvestment. The oil marketer continues to sell LPG and kerosene at government-controlled prices.
Though the Government has decontrolled diesel and petrol prices, the fear of State intervention, if crude oil prices surge again, remains, an analyst said, adding that a fine example is the recent Government intervention in capping the over-recovery through excise duty hikes (twice in a month).
The Government, however, has repeatedly said it will complete the divestment process in ONGC and Coal India by March 31.
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