COMMENTARY
INTERVIEWS
SPECIALS
CHAT
ARCHIVES

IOC disinvestment deferred

The Union cabinet today deferred the decision to disinvest from the Indian Oil Corporation till next year.

This will only marginally affect the disinvestment target for 1998-99, a cabinet minister said.

The disinvestment target for the year, which was earlier fixed at Rs 50 billion, was later raised to Rs 80 billion. The cabinet meeting took stock only of the disinvestment programme, he said.

The next meeting will discuss the modalities for disinvestment for 1999-2000, including the status of strategic sales and the states of the disinvestment commission, he said.

Another cabinet minister admitted that a decision on disinvestment had been deferred since it would amount to a "distress" sale selling at the present price.

"Our stand on the disinvestment programme continues to be the same," he said.

According to informed sources, the government has earned only Rs 3.29 billion this year through disinvestment -- Rs 2.21 billion by selling nine million Concor shares and Rs 1.08 billion through disinvestment in Gas Authority of India Limited.

The government wanted to sell a five per cent stake in IOC, including 2.5 per cent through private placement. However, petroleum ministry officials and merchant bankers are against this as the market is currently not favourable to the scrip. The cabinet today took a final view on the issue.

The department of economic affairs in the finance ministry has pointed out that the core group of secretaries has recommended that the cabinet should set timeframes for strategic sale of shares. It has also recommended that the cabinet committee on disinvestment should meet at least once a month to take stock of the progress on the sale of PSU shares. It suggested that if no progress was made on a particular disinvestment within three months, the job of completing the sale be handed over to a designated department.

The government was planning to mobilise around Rs 5-6 billion when the exercise started in January 1999. At that time, the price of IOC scrips hovered around Rs 425.

However, the share price has been hammered to around Rs 280 in March. An offering at the current market price would have fetched the government much less than Rs 3 billion.

The IOC scrip touched Rs 284.5 in the Bombay stock exchange last Friday while it stood at Rs 277.55 in the national stock exchange. The current prices are within striking distance of the 52-week low, Rs 256.

The scrip's 52-week high was Rs 650. The bearish sentiment has something to do with the cross-holding allowed among major public sector units by the government.

Business news