No state-run oil firm except Oil India is willing to buy shares of ONGC

NEW DELHI: No state-run oil firm except Oil India is willing to buy shares of Oil and Natural Gas Corp, further limiting the options of the government which was forced to defer the public issue of the company last month due to choppy market conditions.

Officials in ministries of finance and oil told ET that the government is considering the option of selling ONGC shares directly to other oil firms to meet its disinvestment target of Rs 40,000 crore for this fiscal. The government, which has so far mopped up just Rs 1,162 crore by selling 5% stake in Power Finance Corporation, hopes to raise Rs 12,000 crore through disinvestment of 5% of its stake in ONGC.

But other than Oil India, which is willing to invest Rs 2,500 crore in ONGC shares, no state-run oil firm has responded favourably. State-run oil marketing companies – Indian Oil Corp, Hindustan Petroleum and Bharat Petroleum – are not in a position to invest because they are saddled with huge losses on account of selling fuel below cost at government-set rates.

State-run oil companies – Oil, Gail – are sitting on cash reserves, but the latter doesn’t want to make an investment that it may not be able to monetise at an opportune time. Oil India can afford to invest in ONGC because it is sitting on a cash reserve of Rs 13,000 crore, chairman of a state-run oil firm said requesting anonymity. “We have reserves but we would prefer to invest in projects. ONGC is a valuable company and buying its shares is a good investment, provided the government allows us to sell it in the market to book profit,” the chairman said.

Selling ONGC shares to other state-run oil firms would help avoid inter-ministerial issues, an official said. “It would be a long process to ask cash-rich Coal India to buy ONGC’s stake, as it would require approvals from the coal ministry as well as the company’s board,” the official explained.

Meeting the disinvestment target is key to containing the fiscal deficit within the target of 4.6% of the gross domestic production this fiscal. “A positive response in the case of ONGC would pave way for a similar approach in disinvestment of Sail or IOC,” a finance ministry official said.

Disinvestment secretary Mohammad Haleem Khan said his department had not yet formally considered the share buy back option. “There has been no letter that has been sent by us (in the matter),” he said.

Earlier, Department of Economic Affairs secretary R Gopalan had said the government was contemplating options, including cash-rich PSus buying government’s shares in other state-run firms.