Govt not to sell family jewels at lower prices; May rethink CIL, ONGC stake sale

FM Jaitley with selected PSU heads in New Delhi on Jan 13.

KEEPING in mind the recent fall in the share prices of PSU Maharatna companies Coal India Ltd (CIL) and Oil and Natural Gas Corporation (ONGC), the finance ministry may reconsider ts plans of selling stake in these companies, said a media reports.

A dilution of 10 percent stake in CIL and five per cent in ONGC will fetch the government Rs 37,500 crore as the prices of the two "family jewels" have seen a slide off late.

This may lead to disinvestment proceeds falling...

short of the budgeted target of Rs 43,425 crore, the reports said a part of the shortfall would be made good through disinvestment in some other PSUs, some of which weren’t in the original road map for FY15. This could help fetch the government about Rs 20,000 crore.

Speaking at the Vibrant Gujarat summit on January 12, finance minister Arun Jaitley had said disinvestment would pick up pace in the last three months of the financial year. Government stake would be sold in more than one company, he had added.

“We are considering a plan for the rest of the year, which might not feature either CIL or ONGC, if prices stay around the current levels,” a senior finance ministry official was quoted as saying in a leading daily.

 The new plan could include sale of stake in Power Finance Corporation (PFC), Rural Electrification Corporation (REC) and NHPC, besides Nalco, Hindustan Copper and NMDC.

Other PSUs where the Centre has more than 75 percent stake may also be considered for divestment.

However, the ministry would go ahead with its plan of disinvestment in CIL and ONGC if the stocks of these companies rose by early March.

A final call on cancelling the two mega stake sales will have to be taken by Jaitley. Given the government’s tough fiscal deficit target and an expected shortfall of Rs 1.05 lakh crore in tax revenue, it seems unlikely that the finance minister will be willing to forego the stake sale in CIL and ONGC.

The finance ministry is seeking Cabinet nod for divestment in Nalco, DCI, NMDC among others.

On January 13, the ONGC stock closed at Rs 339.65 on BSE, down 28 percent from its 52-week high of Rs 472, while CIL shares closed at Rs 361.45 apiece, down 15 per cent from their 52-week high of Rs 423.85. Both stocks had hit their highs in early June, after which investors began to pull out of these, hoping to buy the stocks cheap when the government issued fresh shares.

Stake sales in the two companies in June would have fetched the Centre about Rs 42,000 crore.

Cabinet approvals for stake sales in NHPC, PFC and REC have already been granted. The disinvestment department hopes to secure approvals for disinvestment in Nalco, NMDC, etc, soon. “This means we will have to move fast on the new companies, in terms of getting approvals and conducting road shows. But we are prepared for that,” the official said.

The government had also planned to sell stake worth at least Rs 15,000 crore in Hindustan Zinc and Balco. It had hoped to mop up about Rs 6,500 crore by selling part of its stake in Axis Bank, ITC, and Larsen & Toubro, through the Specified Undertaking of the Unit Trust of India. Now, both plans seem set to be scrapped, at least for this year.