Government looks at divestment in oil PSUs, new subsidy sharing way

With disinvestment in ONGC stuck due to subsidy woes, the government is looking at selling stake in other oil PSUs like Oil India Ltd (OIL) and gas utility GAIL India to meet its revenue targets.

Finance Minister Arun Jaitley discussed possible disinvestment candidates with Oil Minister Dharmendra Pradhan at a meeting but nothing concrete was finalised.

Government was to sell 5 per cent of its stake in the country's biggest oil and gas producer ONGC to raise Rs 17,000-18,000 crore. But the double impact of tumbling global oil prices and the rising subsidy burden has left the ONGC stock battered. It has slipped from Rs 472 in June last year to Rs 341.60 (at close of market). At current price, the government will get no less than Rs 15,000 crore. Pradhan was however hopeful of getting a good price for ONGC as the government is reworking the subsidy sharing formula.

"Government is looking at new subsidy sharing formula. As far as ONGC is concerned, they have some issues regarding subsidy sharing formula. Let's have a relook on the issue. I am sure ONGC will get a better price," he said.

However, the Department of Disinvestment will take a call on time of divestment of ONGC, he told reporters after meeting with Jaitley. The Oil Ministry wants the payout by ONGC and other upstream producers like OIL for subsidising LPG and kerosene to be reduced to the extent of the statutory oil cess they pay to the government.

According to a new subsidy sharing formula, the payout is to be reduced to the extent of Rs 4,500 per tonne oil development cess they pay to the government. The cess in current fiscal will total Rs 10,500 crore.

ONGC and OIL have already paid Rs 31,926 crore in fuel subsidy in the first half and if the ministry proposal is accepted, their payout in remainder of the current fiscal will be no more than Rs 8,000 crore.

Upstream producers like ONGC met nearly half of the revenue loss or under-recoveries that fuel retailers incurred on selling cooking fuel and diesel until recently at government controlled rates.

This dole, which was in the form of deep discounts on oil ONGC sold to refineries, had strained its balance sheet as its net realisation fell below the economic cost of oil.

At the meeting, discussions focused on selling of government stakes in oil companies other than ONGC, a top source said.

"Well I am not ruling out ONGC but the meeting was on other oil companies. I can tell you all options are open and I am watching the market and getting enough stocks in place, when the market is good I will do it," the source added.

The other companies may be OIL and GAIL as well as refiners like Bharat Petroleum Corp Ltd ( BPCL).

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