The Hindu : Disinvestment options to meet revenue target

Online edition of India's National Newspaper
Thursday, Nov 13, 2003

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Business

Disinvestment options to meet revenue target

By Our Special Correspondent

NEW DELHI NOV. 12. In a bid to meet the disinvestment target of Rs. 13,200 crores for the current fiscal, the Government is considering several options to raise revenue from divesting equity in the public sector oil companies.

These include a proposal to sell 20 per cent government shareholding in the Indian Oil Corporation (IOC) and 5 per cent in the Oil and Natural Gas Corporation (ONGC).

Disclosing this here today, the Petroleum Secretary, B. K. Chaturvedi, said the various alternatives proposed would be considered at a meeting tomorrow with the Disinvestment Secretary, Dhirendra Singh.

The Petroleum Ministry is keen to offer a proposal to raise the needed funds through sale of equity in IOC and ONGC rather than sell off any division of these companies.

The suggestion that the marketing arm of IOC could be hived off had been floated at the last meeting of the Cabinet Committee on Disinvestment as an alternative to privatising the Hindustan Petroleum Corporation and the Bharat Petroleum Corporation.

Mr. Chaturvedi told reporters that the proposal envisaged both overseas and domestic sale of equity. But the overseas issue would not be possible in the current fiscal as listing requirements could not be fulfilled in the remainder of 2003-04. A domestic issue, however, would be possible, he said.

The discussions being held tomorrow are in pursuance of the CCD's directive that various options should be explored to raise revenue from disinvestment in the oil sector after the equity sale of HPCL and BPCL faced legal hurdles.

The Supreme Court had ruled that parliamentary approval is needed prior to disinvestment of these two companies.

Subsequently, the CCD had decided that three options could be explored including political consensus on passing the required legislation in Parliament, seeking a judicial clarification of the verdict and finally that revenue generation through other companies like the Fortune 500 IOC could be considered by the disinvestment and petroleum ministries.

Regarding the issue of sale of cross-holdings between the oil companies, Mr. Chaturvedi said requests had been made to get rid of these to increase the liquidity of their shares.

At present IOC has a 9.62 per cent stake in ONGC and a 4.8 per cent holding in GAIL, ONGC has a 9.11 per cent stake in IOC and a 4.82 per cent holding in GAIL. GAIL has a 2.4 per cent stake in ONGC.

He clarified that dilution of crossholding would not provide revenue to the Central Exchequer as the proceeds would go to the individual companies.

At the same time, he said the modalities as to what should be done first — selling Government equity or the crossholding would have to be worked out.

The target for raising revenue through disinvestment has been set at Rs. 13,200 crores for 2003-04 but so far it has been possible to mobilise only Rs. 1,000 crores by this route.

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