North Block believes that a 10 per cent disinvestment of Government shares tantamounts to the Centre shedding that much of the total equity in a company. The petroleum ministry prefers a more literal interpretation of the Cabinet note. It expects the Centre to offload 10 per cent of its existing holding in the three oil and gas companies.

Since the Government owns more than 90 per cent of the shares in ONGC, Indian Oil and Gail, the slight difference in interpretationwill not mean much, but it will make a difference. The petroleum ministry's interpretation will decrease the Government's shares on the block by nearly 1 per cent.

It will also reduce the returns to the Central coffers from the shares on offer by that much. Sources say the close to 1 per cent reduction in total equity on offer will reduce the proceeds from the sale of equity by at least Rs 300 crore.

The Union Cabinet has approved a 10 per cent disinvestment in Indian Oil and Gail and a 12.5 per cent divestment of shares in ONGC, allowing the oil companies to swap equity among themselves. Indian Oil will buy 10 per cent equity in ONGC and 5 per cent equity in Gail.

ONGC will buy 10 per cent equity in Indian Oil and pick up a 5 per cent stake in Gail. Gail is expected to pick up a 2.5 per cent stake in ONGC.A 10 per cent divestment of Indian Oil's Rs 389.28-crore equity capital should bring down the Government holding in the company to 81 per cent from 91 per cent now. A divestment of 10 per cent of the91 per cent Government shareholding (Rs 354.24 crore) will bring down the Centre's stake in Indian Oil to 81.9 per cent, instead (a difference of 0.9 per cent.)

The quantum of Indian Oil shares the Centre intends to offer to ONGC will decrease accordingly to 3.54 crore from 3.89 crore. The change in the number of shares to be swapped among the companies will bring down the proceeds of the sale of stock.

The roughly 1 per cent reduction in Indian Oil shares alone should knock off nearly Rs 150 crore from the company's stock sale estimates. The Indian Oil stock is currently trading at Rs 343.50 per share on the Bombay Stock Exchange.

The Union Government hopes to earn Rs 3,000 crore from the sale of ONGC's equity and Rs 1,700 crore from sales of Indian Oil stock. The Gail shares should fetch the Centre roughly Rs 600 crore.

The petroleum ministry's interpretation of the Cabinet note will enable Indian Oil to pick up 13.68 crore ONGC shares and bring down the Government's shareholding to 86.4 per centfrom 96 per cent at present. Should the finance ministry have its way, the Government stock in ONGC will fall to 86 per cent (a difference of 0.4 per cent.)

Indian Oil will then be able to buy 14.25 crore shares in ONGC, currently trading at Rs 139.90 per share on Dalal Street. ONGC has an equity capital of Rs 1,425.92 crore.

The domestic offering of Gail shares has already brought down the Government's shareholding in the company to 86.4 per cent. The finance ministry's version of the Cabinet note will bring down Government equity further to 76.4 per cent.

The petroleum ministry's interpretation will mean an 8.6 per cent drop in the Centre's shareholding to 77.76 per cent. The Gail shares on offer will drop to 6.57 crore from 8.14 crore, whittling the returns from the sale of Government stock by that much. The Union government now owns 86.4 per cent of Gail's Rs 845-crore equity capital.

The North Block, which plans to mop up close to Rs 5,000 crore from the share swap in oil companies, is unlikelyto accept the petroleum ministry's interpretation. If the petroleum ministry sticks to its guns, the share swap details may be referred back to the Cabinet.

ONGC, IOC to buy Gail stock at Rs 60 a share

ONGC and IOC will pick up 5 per cent stock in Gail at Rs 60 per share, which was the floor price fixed for Gail's domestic offering of shares to institutional investors.

The ONGC board took a decision last week to fix the price of the company's stock on an average of a fortnight's trading rate on the bourses, beginning the first week of February. The scrip, which was trading at roughly Rs 200 per share on Dalal Street early last month, has now slid to Rs 139.90 per share. An average of the fortnight preceding last week works out to roughly Rs 150 per share.

The IOC board is expected to evolve a similar pricing formula soon. Both IOC and ONGC have already paid Rs 500-crore each to the central coffers as the first installment for the share swap. The three national oil companies, IOC, Gail and ONGC,are expected to pay up for the crossholding in each other by March 30, in three equal installments.