Govt to offload 10% each in ONGC, Gail

Sale of cross-holdings deferred

The Cabinet Committee on Disinvestment (CCD) yesterday decided to sell 10 per cent government equity each in Oil and Natural Gas Corporation (ONGC) and Gail (India) Ltd through a book-built market offering.

At current market prices, this is expected to fetch the government around Rs 12,443.01 crore""Rs 10,666.5 crore from ONGC at Rs 748 a share, and Rs 1,776.6 crore from Gail at Rs 210 a share""and is expected to help the government to exceed the current fiscal's disinvestment target of Rs 13,200 crore.

The government is likely to mop up Rs 16,554 crore through disinvestment. This is 25.4 per cent more than the Budget target. The stake will be offloaded in the domestic market. However, this decision could be revised if it is found that the domestic market does not have the appetite to absorb the issues.

The Cabinet also decided that in view of the limited absorption capacity of the domestic market, the unlocking of cross-holdings of Indian Oil Corporation, ONGC and Gail in each other would be postponed till after the sale of 10 per cent government equity in ONGC and Gail.

The sale of the shares will be completed in this fiscal itself. For this, an informal committee comprising finance, petroleum, disinvestment and commerce ministers has been formed which will work out the modalities and try to speed up the process.

According to the Cabinet note on the issue, the sale of equity in the two companies will increase the liquidity of the two firms and provide a healthy trading platform. "This will provide an opportunity to retail investors in the domestic market to hold shares of the blue-chip oil public sector undertakings and help the market to rationalise the share prices of ONGC and Gail on account of trading of a larger number of shares," the note points out.

At present, only 0.72 per cent of ONGC shares and 1.95 per cent of Gail's is with the public. The government holds 84.11 per cent in ONGC and 67.35 per cent in Gail. The paid-up capital of ONGC is Rs 1,425.93 crore and that of Gail Rs 845.60 crore.

Earlier, the petroleum ministry had proposed that the government sell 20 per cent of its stake in Indian Oil Corporation (IOC) and 5 per cent in ONGC. At current prices, this would have fetched the Centre Rs 13,000 crore. However, it seems the disinvestment ministry wants to keep the sale of equity in IOC for a later date.

The previous CCD meeting on October 3 had decided that one way to get around the legal impediments to the sale of Bharat Petroleum Corporation Ltd and Hindustan Petroleum Corporation Ltd would be to put IOC's retail network on the block.

It was decided that the disinvestment and the petroleum ministries would work out the modalities and get back to the CCD within three months.

At yesterday's meeting, held just two weeks before the deadline expires, the strategic sale of IOC's retail network was not taken up.