The Department of Disinvestment (DoD) has circulated a draft note for the consideration of the Cabinet Committee on Economic Affairs (CCEA) for sale of 10 per cent out of government's 68.57 per cent stake in Indian Oil, sources privy to the development said.
It sought comments on the proposal from Petroleum Ministry as well as Departments of Expenditure, Public Enterprises and Economic Affairs. Comments of the Law Ministry and Ministry of Corporate Affairs too were sought.
Sources said the plan to sell 24.27 crore equity shares in IOC was mooted after big-ticket disinvestment in Oil and Natural Gas Corp (ONGC) got stuck in subsidy woes.
Finance Minister Arun Jaitley had discussed possible disinvestment candidates in oil sector, other than ONGC, with Petroleum Minister Dharmendra Pradhan on January 8.
The government was to sell 5 per cent of its stake in the country's biggest oil and gas producer ONGC to raise Rs 17,000-18,000 crore.
However, the double impact of tumbling global oil prices and the rising subsidy burden has left ONGC shares battered. They have slipped from Rs 472 in June last year to Rs 343.85 (at Wednesday's close).
At current price, the government will get no more than Rs 15,000 crore. In 2014-15, the government has sold a 5 per cent stake in steel major SAIL to garner Rs 1,700 crore. It is racing against time to meet its disinvestment target of Rs 43,425 crore for this fiscal year. Blue-chip companies like ONGC, NHPC and Coal India had been lined up for disinvestment.
Sources said disinvestment in ONGC too can happen provided the government is able to rework the subsidy sharing formula.
The Oil Ministry wants the payout by ONGC and other upstream producers like OIL for subsidising LPG and kerosene to be reduced to the extent of the statutory oil cess they pay to the government.
According to a new subsidy sharing formula, the payout is to be reduced to the extent of Rs 4,500 per tonne oil development cess they pay to the government. The cess in current fiscal year will total Rs 10,500 crore.
ONGC and OIL have already paid Rs 31,926 crore in fuel subsidy in the first half and if the ministry's proposal is accepted, their payout in remainder of the current fiscal year will be no more than Rs 8,000 crore.
This dole, which was in the form of deep discounts on oil ONGC sold to refineries, had strained its balance sheet as its net realisation fell below the economic cost of oil.