NEW DELHI, Jan 9: Oil and Natural Gas Corporation (ONGC) will buy 10 per cent stake of the government in Indian Oil Corporation (IOC) and Gas Authority of India (Gail) for Rs 2,400 crore as part of a strategy to meet the government's disinvestment target of Rs 5,000 crore in the current fiscal. ONGC chairman Bikash C Bora said that the equity from the other two oil companies will be purchased from the corporation's cash reserves, which is over Rs 3,500 crore.Likewise, Indian Oil will buy 10 per cent share of ONGC for Rs 2,550 crore, he said. This equity swap alone will yield Rs 2,950 crore for the government. Unable to meet its divestment target of Rs 5,000 crore for 1998-99, the government had allowed six cash-rich PSUs to go for equity swap or buyback of shares. Indian Oil officials were not available for comments.ONGC is likely to record a profit of Rs 2,600 crore for April-December '98 though crude production will be lower, Bora said. Gail would buy up to 2.5 per cent of ONGC's equity which wouldtranslate into an outgo of Rs 300 crore. For the government, the equity swap move by the three oil companies would be the best piece of news as it would translate into an inflow of over Rs 5,000 crore which will adequately meet the disinvestment target set for the current fiscal. This will also help the government in reducing the fiscal deficit which is already threatening to go out of control. It would also pave the way for other PSUs to exercise such a crossholding option in the future.Effectively, when the move is approved by the government, its stake in ONGC would be down from 96 per cent to 83.5 per cent (ten per cent to IOC and 2.5 per cent to GAIL from its own stake). In the case of IOC, this would mean a reduced level of 81 per cent from 91 per cent (after ten per cent is offered to ONGC) while in GAIL, post the 2.5 per cent crossholding deal with ONGC, the Centre's holding would be down to 93.5 per cent from the existing 96 per cent. Similar equity swaps are likely to take place among other oilcompanies.A plan which is under evaluation involves selling the government's stake in Cochin Refineries, Madras Refineries and IBP to Bharat Petroleum Corporation (BPCL) which, in turn, will offer three per cent of the Centre's stake to these companies.In fact, the idea of an equity swap between IOC and ONGC was, in fact, mooted by former petroleum secretary Vijay Kelkar, now finance secretary, in the second Vasant Sheth memorial lecture in 1997. IOC and ONGC are already considering working together in petro-related activities both here and abroad.
