An Oil & Natural Gas Corp. (ONGC) logo on display at a news conference in New Delhi | Prashanth Vishwanathan/Bloomberg
An Oil & Natural Gas Corp. (ONGC) logo on display at a news conference in New Delhi | Photo: Prashanth Vishwanathan | Bloomberg
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New Delhi: India will likely give up direct control of its most-profitable state-run behemoths as Prime Minister Narendra Modi seeks to keep the budget deficit in check, while reviving investments to spur economic growth.

The government has identified the biggest energy companies such as Oil & Natural Gas Corp., Indian Oil Corp., NTPC Ltd. and GAIL India Ltd. as probable candidates for cutting its direct holding to below 51%, Atanu Chakraborty, who steers Modi’s asset sale department, said in an interview Monday in New Delhi. “Government’s indirect holding, through arms such as Life Insurance Corp. of India, will stay above 51%.”

Finance Minister Nirmala Sitharaman last week set a record 1.05 trillion rupees ($15 billion) asset sales target in the year started April 1, while proposing to raise taxes on the wealthy, extract higher dividends from the central bank and increase duties on gold and gasoline to boost revenue and lower the budget gap to 3.3% of gross domestic product. The proposal to lower direct holdings in some state-run companies below 51% was also part of Sitharaman’s budget proposals, which she said would be considered on “case-to-case basis.”

“The government has to consider bringing in strategic investors and give them a say in the management,” said Deven Choksey, managing director at K.R. Choksey Shares and Securities Pvt. in Mumbai. “That will spur growth of these companies.”

The index for state-run companies on BSE Ltd. has gained 3.5% so far this year compared to a 7.1% gain in the broader benchmark S&P BSE Sensex. Indian Oil shares on Tuesday added 4.6%, while ONGC rose 0.1% and NTPC slid 0.3% as of 12:45 p.m. in Mumbai.

In 2017, then-Finance Minister Arun Jaitley aimed to create an integrated public sector oil major to match the might of the international oil and gas giants by combining some or all of its stakes in listed domestic oil and gas firms.

ONGC in January 2018 completed buying the government’s 51.1% stake in Hindustan Petroleum Corp. for $5.78 billion, helping the government to narrow the nation’s budget gap.

Some of the state stake sales will happen this year, Chakraborty, secretary at the Department of Investment and Public Asset Management, said. Exchange-traded funds are the most attractive route, he said. – Bloomberg


Also read: ONGC says it’s not facing a fund crunch despite falling cash balance


 

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5 Comments Share Your Views

5 COMMENTS

  1. Modi Government should not dilute it’s share in the psu’s to finance budget deficit.
    We have already made disinvestment of many PSU’s but still our fiscal deficit is
    Increasing at the alarming rate.
    While these psu’s are profit making so profit
    Making psu’s shares should not be diluted.
    Govt.’s concern is fiscal deficit.It is not due
    To PSU’s.
    Government should take steps to control
    Unnecessary expenditures.
    Government should take appropriate steps
    To check corruption as India is the most
    Corrupt nation of Asia .
    Indian citizens are looking towards Modi ji
    To curb the menace of corruption.

  2. Rather than reducing the state holdings in the PSU government should simplyfy the procurement procedure in the PSU to increase profitability. Procedure of procurement is way too complicated which brings down the competitive edge of these PSU as compared to it’s private competition. Thereby government can earn more revenue interns of dividend and reduce it’s fiscal deficit target without loosing strategic assets.

  3. The govt must really commercialise the operation of these companies before selling to strategic investors to get a better valuation.first these companies should be removed from the clutches of 3Cs .The govt should not Interfere in the pricing policies of the company.prices of PETROLEUM products should be determined by these companies on the basis of market prices without any call from PETROLEUM minister

  4. Whatever the percentage of the government’s stake, what is important is that decisions should be taken on sound commercial considerations. Consider how increases in retail prices of fuel are put on hold on the eve of important elections.

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