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IOC may sell oil PSU pie to buy OIL
August 26, 2004 15:01 IST
State-run refiner Indian Oil Corp may sell its holding in Oil and Natural Gas Corp and Gas Authority of India to garner funds for buying the government's stake in exploration firm Oil India Ltd.
IOC's 9.6 per cent holding in ONGC at today's price would fetch Rs 9,635 crore (Rs 96.35 billion) and its 4.82 per cent interest in Gail Rs 725 crore, enough to buy government's majority holding in OIL.
But OIL will not be merged with IOC and will continue to remain a separate firm under the country's largest refiner.
Highly placed sources said the government was considering allowing IOC to sell its holding in ONGC and GAIL to buy OIL as part of the broad restructuring exercise it is carrying out to cut down on inter-PSU competition and create vertically integrated companies that can face international competition.
None of the state-run oil majors - IOC, ONGC, GAIL, OIL, Bharat Petroleum Corp or Hindustan Petroleum Corp - are fully integrated (having interest in the entire hydrocarbon chain) right from oil exploration to refining and marketing. And most of the time they end up competing against each other for the same market -- like IOC, BPCL and HPCL in oil retailing.
Under consideration is creation of 3-4 integrated firms. One option is to merge HPCL and BPCL with ONGC and OIL with IOC and as part of the other option OIL may be given to BPCL and HPCL to ONGC, sources said.
"We are convinced that oil firms holding minority stake in each other makes no sense. But the stake sale should be under the broader restructuring planned for the oil sector," they said.