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3 oil PSUs to sell cross-holdings
P Vaidyanathan Iyer in New Delhi |
November 12, 2003 09:07 IST
Indian Oil Corporation, Oil and Natural Gas Corporation and Gail India Ltd will sell their cross-holdings in the secondary market in the current financial year.
According to finance ministry officials, the sale, which will happen before the end of March, will enable the ministry to bolster the case for interim dividends paid by the public sector companies.
Substantial funds will also accrue to the exchequer by way of tax on capital gains earned by these companies.
The three state-owned oil firms are expected to rake in about Rs 14,000 crore (Rs 140 billion) by selling their cross-holdings in the secondary market.
While Indian Oil holds 9.6 per cent in ONGC and 5 per cent in Gail, ONGC holds 10 per cent in Indian Oil and 5 per cent in Gail. Gail has a 2.4 per cent stake in ONGC.
The unlocking of the cross-holdings is expected to yield about Rs 2,000 crore (Rs 20 billion) to ONGC, Rs 9,500 crore (Rs 95 billion) to IOC and Rs 2,200 crore (Rs 22 billion) to Gail.
The firms had acquired each other's shares in 1998 for Rs 4,643 crore (Rs 46.43 billion). The capital gains on the transaction will be about Rs 10,000 crore (Rs 100 billion).
A 10 per cent tax would yield at least Rs 1,000 crore (Rs 10 billion) to the exchequer, the officials said.
The sale of the cross-holdings, which was supported by the finance ministry and the petroleum ministry, could be completed soon, they added.
The companies will only need to time the market while offloading their stakes. However, Cabinet approval will be required since the original decision on cross-holdings was taken by the Cabinet.
Vijay Kelkar, adviser to Finance Minister Jaswant Singh, has, meanwhile, convened a meeting of the finance, divestment and petroleum and natural gas secretaries to discuss sale of a part of the government's equity in Indian Oil and ONGC.
The public sector oil firms paid the government Rs 2,687 crore (Rs 26.87 billion) as interim dividend in 2002-03.
The government could easily earn much more from the cash-rich companies in the current financial year, the officials said.