IndianOil disinvestment may be delayed till March 2011
Mumbai   15-Nov-2010

IndianOil disinvestment is likely to get delayed to March — and ONGC share sale pushed ahead of it — as the finance ministry is not releasing the promised Rs 13,000 crore to the oil marketing companies (OMCs) in the supplementary budget to be presented next week.

“The supplementary budget that has been cleared does not mention money to OMCs. It is now likely to be released in February when next year’s Budget is presented,” said a government official.

Though the ministry agreed last month to pay Rs 13,000 crore to compensate the OMCs for under-recoveries incurred in April-September 2010, its inclusion in the supplementary budget was important to improve the bottom line of the OMCs.

IndianOil would have got Rs 9,100 crore to improve its cash flow and realise better value for its shares through the disinvestment that was originally planned for January-end.

Disinvestment secretary Sumit Bose last month said that public offering of IOC and ONGC, as well as Steel Authority of India Ltd was slated for the first quarter of calendar year 2011.

Sources said that the finance ministry was also yet to approve a transparent mechanism on the sharing of under-recoveries that OMCs incur for selling petrol, diesel, kerosene and LPG below their market price.

Of the total estimated under-recoveries of Rs 31,367 crore in the April-September period, upstream companies (ONGC and Oil India) and GAIL shoulder one-third burden through product discounts while there is no clarity on the remainder.

Refiners, which IOC also is, will have to bear a part of the under-recovery after government decides how much subsidy burden it can share.

If the government offloads one-third to refiners, it could dampen the investor sentiments. While Oil and Natural Gas Corp’s disinvestment is a follow-on public offer, IOC’s share sale is an initial offer. The government aims to raise close to Rs 10,000 crore through IOC while an equal amount would come to IOC through fresh equity sale. ONGC’s disinvestment of 5 percent is expected to raise about Rs 15000 crore for the government.