Govt may form holding firm for swift stake sale in oil PSUs

Indian Oil Corporation Ltd and Bharat Petroleum Corporation Ltd stocks rose and closed at Rs 444.90 and Rs 963.60, respectively, on Monday. In the intra-day trade, both the stocks had touched 52-week highs. The idea of a holding company for oil PSUs was mooted in the past too, but analysts were sceptical about the feasibility of the move, given that these firms compete/trade among themselves.

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The planned stake sales in oil PSUs could fetch more than half of the PSU stake sale target of Rs 41,000 crore for the current fiscal. The total disinvestment proceeds, including residual stake sales in private firms and the SUUTI stake sale, are projected at Rs 69,500 crore
for FY16.

“We are looking at creating a holding company for disinvestment in oil companies. This will help us complete the divestment in these firms expeditiously,” a finance ministry official said.

As per the plan, the government would sell 5 per cent stake in ONGC, 10 per cent in IOC, 10 per cent in Oil India and 3 per cent in BPCL. However, the government seems to have put on the back burner a plan to sell its stakes in private companies held through the Specified Undertaking of Unit Trust of India.

The government was also working on a dynamic subsidy-sharing formula with upstream oil companies to ease investors’ concerns, the finance ministry official added. Upstream companies’ subsidy burden, which had increased steeply in recent years, is set to be mitigated. The subsidy burden on ONGC will be much lower than last year this fiscal, thanks to the decontrol of diesel, direct benefit transfer for LPG subsidy and the government’s commitment to bear a larger part of the subsidy onus.

On Monday, finance minister Arun Jaitley held a meeting with finance secretary Rajiv Mehrishi and disinvestment secretary Aradhana Johri to review the divestment road map. Another meeting, sources said, was likely this week.