Date:23/02/2006 URL: http://www.thehindubusinessline.com/2006/02/23/stories/2006022302410300.htm

Back IOC yet to decide on timing of offloading stake in ONGC, GAIL

Our Bureau

The company is expected to take ahit of Rs 8,000 crore through under-recoveries in the current fiscal.

New Delhi , Feb. 22

INDIAN Oil Corporation Ltd (IOC) is yet to take a final decision on the timing of offloading its stake in Oil and Natural Gas Corporation (ONGC) and GAIL (India) Ltd.

"We will have to take a call on the sale of equity in the two companies. In any case we were planning to sell some part of the equity of the two public sector enterprises. The decision will be market driven and not fiscal driven," the IOC Chairman and Managing Director, Mr S. Behuria, said.

Speaking to presspersons on the sidelines of 4th Asia Gas Partnership Summit here, he said, "The ONGC share sale will depend on market conditions. It will also depend on the profitability we want to maintain and our share of oil bonds from the Government."

IOC holds 9.1 per cent of ONGC, while ONGC holds 9.6 per cent of the equity in IOC. Gas transmission firm GAIL holds 4.8 per cent of both ONGC and IOC. IOC has already nominated JM Morgan and Citi Financials as merchant bankers for sale of part of its shareholding in ONGC and GAIL.

Asked about the under-recoveries being suffered by the State-owned company for selling petroleum products below the cost price, Mr Behuria said the company was facing Rs 2 per litre under recovery in petrol and Rs 3 per litre on diesel. The company is expected to take a hit of Rs 8,000 crore through under-recoveries in the current fiscal. "We are selling petrol Rs 2 a litre below the international price parity and Rs 3 for diesel. With trade discounts and cross subsidies by upstream companies, IOC is expected to have net under-recoveries of Rs 8,000 crore," he said.

However, Mr Behuria was confident that the company would be able to maintain its last year financial performance. "IOC will be able to achieve last year's financial results due to cross subsidies and Government bonds as well as partial sale of ONGC and GAIL equity. We expect Rs 6,500 crore of the Rs 11,500-crore Government bonds to be issued before the end of the fiscal," he added.

Responding to a query on whether the recommendation of the Rangarajan Committee pertaining to trade parity would have any impact on the margins, he said the recommendations of the committee were welcome, but would have a marginal impact on the gross refining margins.

"The refining and oil marketing companies are already benefiting from trade discounts. The refining margins are hovering around $ 2.5 per barrel net of discounts. I presume these discounts will not be available with the implementation of the Rangarajan Committee recommendations," he stated.