Govt rethinks CIL, ONGC stake sale as share prices tumble

The depressed share prices of public sector behemoths Coal India and ONGC is forcing the Finance Ministry reconsider its decision to dilute its stake in the two companies, top government officials have told Business Standard.

If the share prices of the two companies remain at current levels, the 10% stake sale in Coal India and 5% stake sale in ONGC will likely be called off.

"We are considering a plan for the remainder of the year, which will not feature either Coal India or ONGC, if prices stay around current levels," a senior Finance Ministry official said.

The move will set back the government's ambitious disinvestment plans, and will likely cut potential disinvestment revenue by about Rs 37,500 crore at current prices. It will also mean that PSU disinvestment proceeds for the year will fall short of the budgeted target of Rs 43,425 crore.

The officials, however, added that there are 6-7 companies, including some that were not in the original divestment plan, that can fetch a total of more than Rs 20,000 crore.

The new plan is likely to include names such as Power Finance Corp, Rural Electrification Corp and NHPC, as well as names which were originally not being targeted this year, including Nalco, Hindustan Copper, NMDC, as well as other companies in which the Centre has a more than 75% stake.

The officials said they were watching the markets closely and made it clear that in case the share prices of the two companies go up "substantially" by early March, they could still go ahead with the planned disinvestment and meet the disinvestment target.

ONGC closed at Rs 347.90 a share on Monday, down 25% from its high of Rs 464 in 2014. Coal India closed at 358.70 per share, down 15% from its 2014 high of Rs 420.24. Both companies hit those highs in early June. Since then, though, the stocks have been falling as investors hope to buy them at cheaper rates when the government issues fresh shares.

Officials maintain that falling short of the budgeted stake sale estimates, even at a time when the government is resorting to large spending cuts to meet the fiscal deficit target, is more acceptable than selling the so-called family jewels at lower prices.

It, however, remains to be seen if Finance Minister Arun Jaitley's office, or the budget division, shares these views since the final call on scrapping the two mega stake sales as well as the alternative plan will ultimately have to come from Jaitley.