Govt agrees to let 3 oil PSUs to divest stake in each other

At present, ONGC holds 9.11 per cent in IOC and 4.82 per cent in GAIL; IOC holds 9.62 per cent in ONGC and 4.82 per cent in GAIL whereas GAIL holds 2.4 per cent in ONGC only.

IOC will make almost Rs 9,300 crore by selling its holding in ONGC and about Rs 700 crore by giving up its stake in GAIL. On the other hand, ONGC could get Rs 4,000 crore from sale of IOC shares and Rs 300 crore by selling the GAIL holding. GAIL too would make about Rs 2,000 crore if it were to sell its stake in ONGC. Out of the process, there will be a capital gain of Rs 12,811 crore, of which government would get 10 per cent as capital gains tax.

According to sources, apart from capital gains tax, the dilution of cross holding will reduce the debt-equity ratio in the three oil PSUs. Also, the government will stand to gain since the share price would go up after the dilution of the cross-holding as liquidity of the shares would be more. As per the instructions of the Finance Ministry panel—headed by Vijay Kelkar who mooted this idea in 1999 as Finance Secretary—the share sale will be permitted provided the size and timing is sequenced to avoid overlapping or crowding out of other disinvestment programmes.

The sale of the cross-holding will also help oil companies garner funds to meet the Tenth Plan outlay. ONGC has committed to investing over Rs 50,000 crore during 2002-07 while IOC has committed to Rs 24,400 crore. GAIL has planned an investment of Rs 8,400 crore.

At the meeting today, there were divergent views with most ministers favouring its announcement after the end of Parliament session on December 23 to avoid an uproar from the Opposition. ‘‘The basic objective of crossholding shares of each other by IOC, ONGC and GAIL is no longer valid as each firm has successfully charted its own programme of growth and diversification in competition with each other,’’ the Ministry said.