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Oil companies can now offload cross-holdings

Special Correspondent

Manner and timing of offloading will be left to the individual oil PSU, says P. Chidambaram

NEW DELHI: The Cabinet Committee on Economic Affairs on Thursday gave its approval to the Boards of Indian Oil Corporation (IOC), Oil and Natural Gas Commission (ONGC) and Gas Authority of India Limited (GAIL) to offload their cross-holdings in each other.

Announcing this, Union Finance Minister P. Chidambaram said the manner and timing of offloading would be left to the individual oil PSU, which would take the decision keeping in view its fund requirements as well as market conditions. It would, however, be conducted under the overall supervision of the Petroleum and Natural Gas Ministry and in consultation with the Finance Ministry.

Emphasising that it was not disinvestment, he said there would be no timeframe for the offloading. There would also be no ceiling on the quantum of offloading. It would totally depend on the PSU's fund requirement. The decisions would be taken on a case-to-case basis. The proceeds would be used for their capital expenditure programmes approved under the 10th Plan. It would be mainly used for expansion of their exploration and production activities. If needed, it could also be used for improving other downstream activities.

Swapping of shares

Priority would be given for offloading in the form of swapping of shares among the PSUs. If that was not possible, they would be allowed to offload the cross-holdings in the market. The Government has decided to allow the offloading as due to various forward and backward linkages, the three PSUs were now competing with each other and there was no more justification for them to have cross-holdings.

IOC has a cross-holding of 13.7 crore shares in ONGC, and 4 crore shares in GAIL, while ONGC has a cross-holding of 3.5 crore shares in IOC, and 4 crore shares in GAIL and GAIL has a cross-holding of 3.4 crore shares in ONGC.

An official release noted that the improvements in the financial position of the companies consequent to the offloading was likely to lead to higher dividends and revenues to the Central exchequer.

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