JOIN USThe offer was part of the government's broader plan to raise about $9 billion from share sales this fiscal year, an effort aimed at plugging fiscal gap and generating funds for schemes for the poor.
But the government has raised only about $250 million through the $1 billion public offer in Power Finance Corp in May, the only divestment so far this fiscal year.
Other large planned divestments, including a share sale in IOC of up to $4 billion and a $1.8 billion offer in SAIL have also been deferred.
ONGC's share sale, first scheduled for March, has been postponed several times this year due to turmoil in global markets and lingering concerns over government fuel subsidies, part of which are borne by ONGC.
ONGC did not disclose a reason for this latest delay, which comes after the company went on road shows in overseas markets including the United States, London and Singapore, and just days before a scheduled launch for Sept 20.
A source with direct knowledge told Reuters late Thursday that the government had decided to delay the share sale due to poor market conditions.
ONGC said the government would evaluate its decision in due course, and banking sources said no new dates had been fixed for the offer.
The sale of a 5-percent stake by the government could have fetched as much as $2.5 billion but the shares were widely expected to be issued at a discount in an effort to lure investors in a volatile market.
The BSE Sensex is down more than a fifth so far this year, making it one of the world's worst-performing markets.
At 10:17 a.m. (0447 GMT), shares in ONGC, the third-largest listed firm in India by market value, were trading 7 percent higher at 278.65 rupees in a firm Mumbai market.