With Oil Ministry opposed to selling Indian Oil Corp (IOC) shares on stock market, a ministerial panel is likely to decide tomorrow on selling 10 per cent government stake in the company to ONGC and OIL.
An Empowered Group of Ministers (EGoM) headed by Finance Minister P Chidambaram will decide on selling 3 per cent government stake in IOC to Oil and Natural Gas Corp (ONGC) and another 7 per cent to Oil India Ltd (OIL).
"The EGoM is scheduled for tomorrow afternoon," a top source said. "The EGoM will be presented with two options - splitting the 10 per cent stake that the finance ministry wants to sell between ONGC and OIL equally or asking OIL to buy 7 per cent stake and ONGC the rest 3 per cent."
The source said Oil Ministry continues to have "concerns" over IOC shares being sold in the market at current low rates.
While shares being bought by ONGC and OIL will meet the finance ministry's urge to meet mop up about Rs 4,500 crore from IOC disinvestment, buying shares of the nation's largest oil firm at low rates presents the oil producers an opportunity.
"There will be no lock-in period and ONGC/OIL can sell the shares they buy now in 6 months and make profits," the source said. "The Finance Ministry says give us Rs 4,600 crore either by way of disinvestment, cross-holding or special dividend. They have no particular objection to IOC shares being bought by ONGC or OIL."
Under the proposal, the government shares in IOC will be sold to Oil and Natural Gas Corp (ONGC) and Oil India (OIL).
The government in the past too had resorted to the cross-holding route to shore up its revenues.
In late 1990s, the government had sold its shares in Oil and Natural Gas Corporation (ONGC), GAIL and Indian Oil Corp (IOC) to raise Rs 4,643 crore.
According to the cross-holding plan, ONGC bought 9.11 per cent in IOC and 4.83 per cent in GAIL. IOC bought 9.61 per cent in ONGC and 4.83 per cent in GAIL. GAIL in turn bought 2.4 per cent in ONGC.
In 2006, IOC sold 1.92 per cent, or a fifth of its holdings in ONGC for Rs 3,672 crore, recovering its entire initial investment and some more. It also sold half its holdings (2.41 per cent) in GAIL for Rs 561 crore.
The EGoM on January 9, 2013 deferred disinvestment of 10 per cent stake in IOC through an offer for sale on the stock markets owing to strong opposition from oil ministry.
The ministry felt IOC shares, which today closed at Rs 208.95, were way below their intrinsic value. The closing was also way lower than the 52-week peak of Rs 375 reached on January 18 last year.
The Finance Ministry had planned to sell 24.27 crore IOC shares to meet a tenth of its Rs 40,000 crore disinvestment target for the current fiscal. The government holds 78.92 per cent stake in the country's largest oil refiner as on June 30.
