ONGC, OIL to bail out Centre

New Delhi: The Empowered Group of Ministers (eGoM) headed by finance minister P. Chidambaram on Thursday cleared a plan to sell 10 per cent government stake in Indian Oil Corporation (IOC) to ONGC and OIL to rake around Rs 5,000 crore.

The oil ministry has been against the disinvestment of IOC as it feels that market conditions is not favourable for stake sale. Due to the oil ministry’s opposition, IOC divestment has been in limbo for some time.

However, as a way out  the government has decided to sell 10 per cent IOC stake to two other PSU oil companies to raise money and achieve disinvestment target for the current fiscal which is at Rs 40,000 crore.

It has not been decided what proposition ONGC and OIL will buy. Also whether the stake will be sold through stock exchanges or some other mechanism is also being looked into. There will be no lock in period for which ONGC and OIL will have to keep IOC’s stake.

The boards of ONGC and OIL will meet to take a decision on the proposal. “In-principle we have taken a decision for a block deal. Modalities will be worked out (soon),” said oil minister M. Veerappa Moily after the meeting of the eGoM.

“We feel that the share of IOC is grossly under-priced right now. And it commands more value. Normally, we would not want to do a block deal (but since share price is low) we thought we should follow this route which would enable revenues to be raised,” oil secretary Vivek Rae told reporters on Thursday.

ONGC chairman Sudhir Vasudeva said most likely the 10 per cent stake will be split equally between ONGC and OIL.