"Keeping valuations in mind, this is the right time to divest in ONGC," he said, adding that the stake sale is likely to happen in the first week of November.
He said the disinvestment secretary today held a meeting with the merchant bankers in this regard.
The Cabinet had last month cleared 5 per cent 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 was trading with a gain of 6.21 per cent in the afternoon at Rs 421.90 on the BSE. At the current market price, the sale of 5 per cent stake or over 42 crore shares, would fetch about Rs 18,000 crore to the exchequer.
The official further said that the gas price hike decision and diesel deregulation would give clarity to investors.
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.
The merchant bankers will advise the government on the timing and modalities of Offer For Sale (OFS) and ensure best returns to the government, which holds 68.94 per cent stake in ONGC.
The government had last sold 5 per cent stake in ONGC in 2012 for Rs 14,000 crore.
In the current fiscal the government plans to mop up Rs 43,425 crore from selling stake in various state-owned firms.