Current indications are that 5 per cent of the government's equity in the corporation will be offloaded though this could be increased even to 10 per cent if market conditions are favourable. The other deciding factor would be the urgency to meet the disinvestment target of Rs 10,000 crore for the current financial.

The PSUs that have been identified for the exercise are Engineers India (EIL), Indian Petrochemicals Corporation (IPCL) and Lubrizol India. Apart from this, sale of government equity in Madras Refineries, Cochin Refineries, IBP and Bongaigaon Refinery & Petrochemicals has also been factored into the overall divestment target.

Unfortunately, the current political uncertainty in New Delhi coupled with the financeministry's reservations on the plans for some of the oil companies could lead to a massive shortfall in the figure. This is all the more reason why the IOC disinvestment programme will be given top priority though the state of the market remains cause for concern.

The issue has been hanging in the balance for nearly three years now and has, in fact, prevented the corporation from going ahead with a 1:2 bonus issue. This was given the go-ahead by the petroleum ministry way back in 1997 and may not see the light of day even during the current financial. Reports have been doing the rounds that a bonus is in the offing but this is impossible to conceive of in the backdrop of a disinvestment plan.

During the oil pool crisis two years ago, IOC was forced to seek deferred credit for crude purchased from the Oil and Natural Gas Corporation. This worked out to a whopping Rs 1,650 crore and the fact that a Fortune 500 company was struggling to pay up its dues convinced the government that it made sense to defer thedivestment schedule. There were other hiccups that occurred along the way like a change in government at the Centre which only led to delays in decision making.

Ten per cent of the government's stake in IOC has already been bought by the ONGC in a crossholding deal early this year. Today, the Centre holds 81 per cent in IOC which could be down to 76 per cent if everything goes according to plan. The mood in oil industry circles, however, suggests that there is every likelihood of the disinvestment programme being put on hold yet again.

What also needs to be borne in mind is that the Cabinet has already given its go-ahead to reduce its holding in non-strategic PSUs to 26 per cent (a definition which includes the refining companies). The petroleum ministry, in its turn, has reiterated that there is no way the Centre's stake in oil PSUs will be down to under 51 per cent till 2002.

Either ways, it is clear that in the next three years, the government will need to chalk out its options where it will eitherhave to sell a large part of its stake in any oil company to a strategic partner or a clutch of financial institutions. To ensure that revenue collection remains the key, the Centre could prevail upon the PSUs to go in for another crossholding pact.