Public sector disinvestment is gathering pace, albeit with changed contours, yet promising to reduce the feared shortfall in proceeds for the government.
Close on the heels of the Coal India decision to pay an all-time high R16,485-crore special dividend plus the resultant dividend distribution tax of R3,100 crore to the government, an empowered group of ministers (EGoM) chaired by finance minister P Chidambaram on Thursday approved the sale of a 10% stake in state-run refiner Indian Oil Corporation (IOC) through a block deal to Oil India and ONGC, two other public sector firms.
The transaction could fetch the government R4,800-5,000 crore and is expected to happen “in a week or so”, according to oil secretary Vivek Rae. He said that ONGC and OIL might take 5% stake each in IOC through this deal, although a final call is yet to be made. He also said the shares would be sold at discount or a premium of 1% to the prevailing price of the IOC scrip.
The IOC share closed 1.3% higher at R212.25 on Thursday, while those of ONGC and Oil India slid 1.7 % and about 1%, respectively. The EGoM decision came after market hours.
In the case of Coal India, trade union protests have come in the way of the government plan to sell a 10% stake in the miner (the plan was changed to a 5% stake sale but even that hasn’t worked), while the IOC stake sale stumbled upon poor market response and the petroleum ministry’s reluctance.
Thankfully for the government, the path is now clear for the sale of its residual stakes in Hindustan Zinc and Balco without having to seek Parliament approval, as the attorney general has given a favourable opinion.
“In principle, we have taken a decision for a block deal. Modalities will be worked out (soon),” oil minister M Veerappa Moily told reporters after the EGoM meeting, also attended by heavy industries minister Praful Patel and commerce and industry minister Anand Sharma, apart from him and Chidambaram.
Though a final decision on the proportion of stakes each company will take would be decided by respective company boards. Sudhir Vasudeva, Chairman of ONGC, which already holds 8.77% stake in IOC, said “most likely” the 10% stake will be split equally between ONGC and OIL. “The 5% stake will cost us Rs 2,200 to