The Cabinet Committee on Economic Affairs on Wednesday permitted the Indian Oil Corporation, Oil & Natural Gas Corporation and the GAIL (India) Ltd to sell their cross-holdings valued at around Rs 25,000 crore (Rs 250 billion).
Finance Minister P Chidambaram told reporters after the CCEA meeting that the three public sector companies would first explore the option of a swap deal.
The shares can be off-loaded in the markets if the companies failed to arrive at a consensus on a swap or some shares were left with them.
"The companies can utilise the proceeds from the sale of the shares in funding their capital expenditure programmes approved under the Tenth Plan. Besides, an improvement in the financial position of these companies is likely to lead to higher dividends and revenues to the Central exchequer," an official release said.
Chidambaram, however, said that the government will not ask the companies to pay special dividends based on the receipts from the sale of the cross-holdings.
The release said the companies can decide on the manner and timing of off-loading the cross-holdings in consultation with the petroleum and finance ministries. The three public sector companies will take a decision on the sale based on their fund requirement needs as well as market conditions, it added.
Last week, the ONGC said that it did not intend to sell the 137.06 million IndianOil shares that it had acquired when the government sold them. The IndianOil intended to sell a third of its holdings in the ONGC to finance overseas acquisitions.
"We have not fixed a timeframe. It is entirely up to the companies to come up with proposals. They have to enter into agreements among themselves.... Now, the three companies are competing with each other and the earlier justification for having cross-holdings is no longer valid," Chidambaram said.
The knots
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IndianOil holds 9.6% in ONGC and 4.8% in GAIL
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ONGC owns 9.1% of IndianOil and 4.8% in GAIL
- GAIL holds 2.4% in ONGC
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