The government plans to sell 10 per cent of its stake in state-owned Indian Oil Corp (IOC) and 5 per cent in Oil and Natural Gas Corp (ONGC) in a deal that could fetch the exchequer about $5.6 billion (R26,040 crore).
"The ministry has taken an in-principle decision to sell its stakes in IOC and ONGC," said S. Sundareshan, petroleum secretary. "We have to go to the Cabinet now."
The government owns 78.9 per cent in IOC and 74.1 per cent in ONGC.
The oil ministry had allowed IOC to sell an additional 10 per cent of the expanded share capital, Sundareshan said. "Sales in both companies are expected to be completed between January and March 2011."
Inclusion of oil companies such as IOC and ONGC in the government's disinvestments roadmap follows the recent reforms in the petroleum sector such as decontrol of petrol and diesel prices, increase in kerosene and LPG prices and increas in the consumer price of natural gas.
IOC would be the first to be divested but only after it makes an initial public offering of 10 per cent or nearly 24 crore shares to raise R9,500 crore for part-financing its capital expenditure programme estimated at R75,000 crore. This would be followed by the sale of 10 per cent government holding, or 19 crore shares, to raise R7,600 crore. Following the two-step sale, the government's equity in IOC would drop to 64.6 per cent.
Disinvestment in ONGC will follow with a 5 per cent sale, or 10.7 crore shares, to raise around R12,840 crore at the current market price of R1,200 per share.
The government plans to raise a record $8.5 billion (R40,000 crore) from asset sales during 2010-11.