ONGC stake sale okayed; decision on BHEL later

An Empowered Group of Ministers (EGoM) headed by Finance Minister Pranab Mukherjee on Wednesday gave a go-ahead for stake sale in Oil and Natural Gas Corporation (ONGC) by the end the of current fiscal ending March 31, 2012, preferably through the auction route.  

The much-awaited divestment in Bharat Heavy Electricals (BHEL)—expected to fetch around Rs 2,500 crore— was deferred and will be taken up next fiscal starting April 1.The EGoM will meet soon to decide the date and the price at which divestment in ONGC will take place. At the current market price of Rs 280 a piece, a 5 per cent stake sale may fetch over Rs 10,000 crore. 

“The government is considering the auction route for ONGC. No timeline is fixed as yet. The EGoM will meet again shortly,” Petroleum and Natural Gas Minister S Jaipal Reddy told reporters.

In November 2011, the government put on hold a proposal to sell 5 per cent of its stake in ONGC through a public offering due to weak market conditions. It owns 74.14 per cent stake in ONGC and plans to sell 427.77 million shares, which will reduce its holding to 69.14 per cent.

For the year ending March 31, the Centre had set a target of Rs 40,000 crore by disinvesting from companies like ONGC, BHEL, National Building Construction Corp, National Aeronautic Ltd, Rashtriya Ispat and SAIL.
However, Disinvestment Secretary Mohammad Haleem Khan said it was almost impossible now to meet the target. The government has so far mopped up just a little over Rs 1,100 crore from disinvestment in Power Finance Corp as all other share sale plans have been stalled since August after global financial markets were rattled by the rating downgrade in the United States and European sovereign debt crisis.

Delaying big-ticket share sales in SAIL, ONGC and BHEL coupled with rising subsidy bill and slowdown in revenue flows increased the strain on government finances and raised questions over the fiscal target.

Analysts see a large fiscal slippage and widening the deficit to as high 6 per cent of GDP but the Finance Ministry is trying to keep it close to 5 per cent.