While stock market took a beating on Thursday owing mainly to the sharp spike in oil prices caused by the political imbroglio in the West Asia region, industry experts have turned sceptical about the follow-on public offering of state-run Oil and Natural Gas (ONGC) hitting the market before the end of the fiscal. For the government, which is pinning its hopes on the dis-investment proceeds as well for improving its fiscal health, it is still early to admit this, though.
An industry expert requesting not to be identified, told FE: ?The (ONGC) issue has low probability of coming in this fiscal, as crude oil prices have again gone up (Indian basket of crude stood at $105 a barrel on Thursday) and still there is no clarity on the oil subsidy issue. The timing is not that great as markets are choppy which can affect the proceeds from the issue?.
A senior government official, however, chose to put up a brave face and said that the ONGC follow-on public offer plan has so far not been changed.
Rising crude oil prices and the government’s inability to increase fuel prices is all likely to spoil the government?s subsidy calculations. The country meets 80% of its crude oil demand through imports. The Indian basket of crude oil has averaged around $99.37 per barrel so far in February, up 5.85 per cent from the January average of $93.87. The under recovery, or the revenue losses, of public sector oil marketing companies (OMCs) on selling diesel today stands at R10.74 a litre. The OMCs are also losing R20.56 on selling a litre of kerosene and R356 for every 14.2-kg LPG cylinder.
No clarity on the subsidy issue is the main reason for postponing the Indian Oil public offer to the next financial year as the company feared low investor participation due to heavy subsidy burden.
The R13,000-crore public offering of ONGC is scheduled for March 15. The finance ministry is hopeful that the issue will come out this year itself.
?Everything is going as per the plans and company?s board is meeting tomorrow. We are planning to bring this issue in the mid March,? an official from the disinvestment ministry told FE.
ONGC is likely to file the red herring prospectus for the FPO by February 25.
The government has raised over R22,000 crore through selling equities in the PSUs so far and has been banking on issues of ONGC and SAIL to meet its target of raising about R40,000 crore through stake sale.
The public issue of SAIL is expected to come for the next fiscal now.