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| ONGC CMD Dinesh K Sarraf |
THE Centre is all set to sell its stake
in ONGC by next month. The Cabinet Committee on Economic Affairs
(CCEA) had approved the disinvestment in September.
This follows the massive success of the
disinvestment process in SAIL earlier this month.
The Centre intends divesting 5 percent,
or...
over 42.77 crore shares, in ONGC.
Based on the last closing price
(December 19) of Rs 349.30, the Centre can mop up about Rs 14,900
crore from the sale. Currently, it holds 68.94 per cent in ONGC.
Earlier this month, the Centre had sold
five percent of its equity in Steel Authority of India Ltd (SAIL).
The offer was oversubscribed more than
two times.
The SAIL offering was the first public
sector share sale under Narendra Modi-led NDA government after taking
charge from the UPA government in May this year.
The government aims at collecting
Rs.43,425 crore through selling shares in various state-owned firms
during current fiscal.
ONGC’s share sale is critical for the
Centre’s fiscal health as tax collections have been tepid.
The Centre will use the offer-for-sale
route through stock exchanges (known as the auction method) for the
share dilution. It will set aside a higher quota for retail
investors.
Although SEBI norms prescribe only a
minimum 10 percent for retail investors, for ONGC the Government
proposes to reserve 20 per cent for them and also give a 5 per cent
price discount. This concession is to be extended for the Coal India
and the NHPC divestments, too.
According to media reports efforts are being made to work out a subsidy-sharing
formula.
As part of the Centre’s
subsidy-sharing mechanism to compensate PSU oil marketing
companies for selling domestic LPG, kerosene and, till recently,
diesel below market price, ONGC bears a sizeable part of the burden.
ONGC shoulders almost half of the under-recoveries of oil marketing
companies, hurting its profitability.
Now,
the Centre is looking at various options that could reduce the burden
for ONGC.
During road shows for the ONGC
disinvestment, potential investors had raised concerns about the
impact of the ad hoc subsidy-sharing mechanism on the oil major’s
balance sheet.
Earlier, the petroleum ministry had
given its in-principle approval for five percent stake-sale in ONGC
which may fetch the government about Rs. 18,000 crore to meet
disinvestment target for the current fiscal.
“Ministry of Petroleum and Natural
Gas has agreed in-principle to the proposal of disinvestment of 5 per
cent government stake in ONGC,” Minister of State for Finance
Nirmala Sitharaman said in a written reply to the Rajya Sabha.
“ONGC, while supporting disinvestment
of this equity held by government of India, has suggested resolution
of a few issues, including fuel subsidy mechanism and gas pricing
policy, to enable better price realisation from such disinvestment,”
she said.
ONGC, a Maharatna PSU and India’s
flagship energy major is engaged in exploration and production
of oil and gas in India and abroad.
A global player in energy, it
contributes about 69 percent of India’s domestic oil and gas
production. Currently, ONGC through its subsidiary ONGC Videsh Ltd.,
is India’s largest transnational corporate with overseas investment
of over $10 billion in 16 countries.
As per the Budget 2014-15, the
disinvestment target is Rs. 58,425 crore including receipts from
disinvestment of government stake in the non-government companies.
The government also plans to sell five
percent stake sale in ONGC, 10 percent in Coal India and 11.36
percent in NHPC.
Similarly, the department of
disinvestment has already initiated the process for stake sale in
MOIL Ltd. It has issued a Request for Proposal (RfP) for appointing
merchant bankers and selling brokers for disinvestment of 10 percent
equity in the PSU.
The Centre intends disinvesting 10
percent of its 71.57 percent holding in the company.
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