Come Nov, govt to start FY15 disinvestment with ONGC

Written by fe Bureau | New Delhi | Updated: Oct 21 2014, 06:27am hrs
Ending a delay that has raised doubts about whether the governments budget estimates on disinvestment will be met, the finance ministry is set to start its FY15 disinvestment programme in the first week of November, with a 5% stake sale in ONGC, a top ministry official said on Monday.

Keeping valuations in mind, this is the right time to divest ONGC, the official said, adding that new disinvestment secretary Aradhana Johri was recently in Mumbai meeting merchant bankers in this regard.

The Cabinet had last month cleared the stake sale in ONGC. The disinvestment department has also selected 5 merchant bankers Citigroup, HSBC Securities, UBS Securities, ICICI Securities and Kotak Mahindra Capital for managing the stake sale. The ONGC scrip closed on Monday at R418.85, up 5.4%, on the BSE. At the current market price, the sale of 5 % stake, or over 42 crore shares, would fetch about R18,000 crore to the exchequer.

After a long wait, the government on Saturday deregulated diesel prices and raised the natural gas rates. While diesel deregulation is an important reform initiative, hike in gas prices will directly benefit oil exploration companies, including ONGC.

For FY15, the government is targeting a minimum of R43,425 crore from stake sale in 11 PSUs, and R15,000 crore from the sale of its stake in HZL-Balco. The DoD has got CCEA approvals for SAIL, HAL, RINL and HZL-Balco, Coal India, ONGC, and NHPC.

As reported by FE earlier, the bankers and the government were busy preparing to start disinvestment and divest SAIL by the last week of September or first week of October. However, a fall in share prices since the highs in June, and finance minister Arun Jaitleys leave of absence due to health problems led to the delays.

Insurance Bill likely in winter session: Finmin

The official, who is one of the key policymakers in the government, also said that the long-pending Insurance Bill, which seeks to raise FDI cap in the sector to 49%, is expected to be taken up in the forthcoming winter session of Parliament. The select committee is looking into the Bill. We will take it up in the winter session, he said.

Insurance sector analysts say that the reform is expected to increase the flow of foreign investment to R25,000 crore into the sector. The move would help private insurance firms to get much-needed capital from overseas partners. There are about two dozen private sector insurance firms both in life and non-life segment.

The Insurance Laws (Amendment) Bill, which proposes to hike the FDI limit in the insurance sector to 49% has been caught in a logjam with the Congress-led opposition of nine political parties insisting that it be referred to a select committee.

Bowing to the opposition pressure, the government had in August agreed to refer the Bill to the 15-member select committee. The panel is expected to submit its report by the third week of November. In his FY15 budget speech, Jaitley had said that the insurance sector is investment-starved and there is a need to increase the composite cap in the sector to 49%, with full Indian management and control, through the FIPB route.

He also said that in spite of a lower expected subsidy burden this fiscal due to diesel decontrol and low global commodity prices, the Centre was keeping its fingers crossed on the FY15 fiscal deficit coming in below the budgeted 4.1% of GDP. We still have to wait for the revenue collections of the last two quarters to see where we stand, he said.