Murli Deora agrees to 10% divestment of IndianOil, 5% of ONGC
New Delhi   01-Sep-2010

Bowing to the national need, the Petroleum Ministry has agreed to Finance Ministry’s proposal to include IndianOil and Oil & Natural Gas Corp in the list of public sector undertakings (PSUs) slated for disinvestment this financial year. Last Saturday, Petroleum Minister Murli Deora approved the sale of 5 percent government equity in ONGC and 10 percent in IOC to garner about Rs 20,000 crore in the current fiscal after withholding his consent for almost a fortnight for clarity on the oil subsidy scheme.

However, even before Deora could make up his mind, a Committee of Secretaries had included them among the shortlisted PSUs. The two featured last among the potential earners at the CoS meeting held on August 17 to fast track the disinvestment process. The CoS has directed the administrative ministry of the shortlisted PSUs to obtain blanket approval from the Appointments Committee of Cabinet for selecting non-official directors on the Board so that the “disinvestment process is not hampered due to the non-appointment of independent directors”.

All eight shortlisted PSUs fall short in independent directors. While Coal India Ltd has two less, Steel Authority of India Ltd has 10 short; Manganese Ore (India) Ltd has four missing; Hindustan Copper Ltd two; IOC four; ONGC five; and, Shipping Corporation of India all eight. Four independent directors have retired at Power Grid Corporation of India Ltd and are due for re-nomination.

In order to fast track, a company can proceed with the public offer by filing the letter of offer with SEBI and stock exchanges without requiring to file draft offer document for their comments. However, it must fulfill clause 49 of the Listing Agreement which requires that companies seeking listing on the stock exchanges should have half of the board as independent directors before filing the Draft Red Herring Prospectus. The CoS decided not to seek any relaxation in the listing norms.

The Finance Ministry has targeted Rs 40,000 crore through disinvestment, an ambitious figure considering it raised Rs 24, 125 crore last fiscal, but has so far managed to garner Rs 1,079 crore through Satluj Jal Vidyut Nigam Ltd and Rs 977 crore from Engineers India Ltd.

Between the two oil companies, IOC would go first on the block with a simultaneous initial public offer of 10 per cent to raise Rs 9,500 crore for its capital expenditure and a 10 per cent sale of government holding to raise Rs 7,600 crore. ONGC’s disinvestment is expected to raise Rs 12,840 crore.