Besides, another 10 per cent is recommended to be divested in favour of private sector and joint-sector refineries.

The commission has also recommended raising money for the corporation's Rs 5,600-crore expansion programme through a combination of domestic and global issues.

The proposals are under active consideration of the Government and the SCI board has been asked to give its suggestions on these recommendations.The idea behind the proposal is prompted by the fact that SCI plays a strategic role in transporting vital supplies of crude and other petroleum products.

SCI's crude tanker tonnageconstitutes about 60 per cent of the total tonnage of the company's fleet and, at present, transports about 70 per cent of the domestic imports of crude into the country. The dry bulk and specialised carrier tonnage constitutes about 30 per cent of the total tonnage of 57.6 million tonnes. With the deregulation of the oil sector, the preferential treatment for SCI in crude carriage is expected to be replaced by competition from both Indian and foreign vessels.

The Disinvestment Commission feels that if the refinery companies constitute a core group of stable shareholders in SCI they would benefit from equity linkages with vital supplier of services. This will be in line with international practice wherein almost all major oil companies own sizable tanker fleet to cater to their requirements.

The proposal under consideration is in favour of broadbasing the SCI board after the strategic sale reflecting the shareholding pattern of the company. All refinery companies which will hold a part of the equityshould have presentation on the SCI board, the commission said.

If the transaction fructifies, the Government's holding in the corporation will come down from 80 per cent to 40 per cent. The Government has already disinvested 20 per cent of its equity to UTI, LIC, GIC, mutual funds and others. The SCI also has a fairly large capital expenditure programme of about Rs 5,600 crore over the ninth Five-Year Plan aimed at part-replacement of existing fleet as well as adding new ships. The company plans to raise about Rs 550 crore from equity markets and borrow about Rs 3,800 crore from the international markets with the balance to be funded through internal accruals.

The Disinvestment Commission has recommended that SCI should make a equity offer in the domestic market to insititutional investors via book-building. In the next stage, shares may be sold to the small investors and employees through a retail issue. offering 10 per cent discount to the wholesale price. Tapping of the overseas market is alsoplanned.

INSIGHT:

Let oil PSUs make the choice
It is true that a synergy does exist between the needs of the oil companies and SCI's oil tankers. It is also true that the country has a strategic interest in having its own fleet of tankers. Replacing Government holding in SCI by that of the oil companies does therefore make a lot of sense.

Unfortunately, however, the Government is yet to make up its mind regarding the restructuring of oil companies. Unless it does that first, requiring oil companies to pick up a stake would not be in order. Also, the oil companies, who compete with each other, must also be free to decide whether it is in their interests to team up and invest in SCI.

-- Manas Chakravarty