The Centre -- running out of cash, and time before the Budget to meet its fiscal deficit target -- will get as dividend Rs 3,964 crore (Rs 39.64 billion) from its flagship listed firm Oil and Natural Gas Corporation (ONGC).

The state-owned explorer, in which the Centre owns 74.14 per cent or 6.34 billion shares, informed the Bombay Stock Exchange that the Board of Directors has approved an interim dividend of Rs 6.25 per equity share for 2011-12.

The news will come as a consolation for the government that had to shelve a Rs 12,000-crore (Rs 120 billion) plan to sell its 5 per cent stake in ONGC in a follow-on offer last year.

The share sale was discontinued due to lack of interest among investors amid volatile market conditions and uncertainty over the government's fuel subsidy plan. Government has since been exploring options -- including buybacks, cross-holding and institutional placements -- to raise money under the divestment programme.

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On Wednesday, a cabinet meet to finalise the revised plan for the programme got adjourned as ministers could not agree on the preferred mode of divestment.

The ONGC dividend issue will also benefit two sister concerns who hold stake in the state-run company through a cross-holding plan: Indian Oil Corp, which holds 7.69 per cent stake, will be entitled to a dividend payout of Rs 411 crore (Rs 4.11 billion); GAIL, which holds 2.4 per cent, will earn Rs 128.5 crore (Rs 1.28 billion).

IOC and GAIL have earned dividends of Rs 5,017 crore (Rs 50.17 billion) and Rs 1,420 crore (Rs 14.20 billion), respectively, according to a recent study by Business Standard.

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Life Insurance Corporation, which owns little over 3 per cent, will be richer by Rs 169.6 crore (Rs 1.69 billion). ONGC Chairman and Managing Director Sudhir Vasudeva told PTI: "The total payout on this account will be Rs 5,347.20 crore (Rs 53.47 billion)."

ONGC will also pay dividend distribution tax of Rs 867.45 crore (Rs 8.67 billion), taking the outlay for the company to Rs 6,214.65 crore (Rs 62.14 billion).

Other public sector firms that are cash-rich such as Coal India may also declare dividends. ONGC shares gained one per cent on the BSE to close at Rs 265.95 on Wednesday.

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Oil field investment

ONGC said its board has approved a Rs 352.5-crore investment in producing oil from a marginal field off the Mumbai coast.

ONGC Chairman and Managing Director Sudhir Vasudeva said the board has approved redevelopment of the B-173A marginal field situated 50 km west of the Mumbai coastline for improving its recovery factor.

The field was discovered in 1992 and produced 1,870 barrels of oil a day. Till October 31, 2011, the field has produced about 2,076 million tonnes.

"The proposal envisages installation of one bridge-connected wellhead platform and drilling and completion of three development wells at an investment of Rs 352.49 crore (Rs 3.52 billion)," he said.

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With these additional inputs, recovery from the field is expected to be enhanced from 16.98 per cent, as envisaged in the base case for development, to 20.36 per cent of oil initially in-place.

From a production perspective, this would result in a cumulative output of 3.330 million tonnes of oil and 0.4719 billion cubic metres of gas from the field by 2025-26, as against the business-as-usual scenario of 2.763 million tonnes of oil and 0.4009 bcm of gas.

The project is scheduled to be completed by March, 2014. Vasudeva said the board also approved Rs 115 crore (Rs 1.15 billion) of investment in the Heera and South Heera fields, situated 70 km south-west of Mumbai city.

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"The feasibility report of Heera Redevelopment Phase-II is presently under examination and due for put up to the board in March 2012," he said.

Considering the onset of the monsoon in mid-2012, the ONGC board decided to grant approval to the project ahead of ratification of the feasibility report as it would enable expeditious production of oil and gas through three clamp-on structures, of which two will be completed before the onset of the monsoon.

It has been felt that with this proactive and advanced action, drilling activities in the slots of the clamp-on could be conducted even during the monsoon, which would make early production from these wells during 2012-13 & 2013-14 possible, he said.