ONGC seeks clarity on gas pricing, subsidies before stake sale

India's state-owned explorer Oil & Natural Gas Corp (ONGC) wants the government to resolve critical issues like fuel subsidy-sharing and natural gas pricing before its planned $3-billion stake sale in the company.

The government plans to sell 42.77 crore shares, or five per cent of its stake in ONGC, worth Rs17,400 crore at current prices. This first disinvestment by the new government is part of a plan to narrow the budget deficit.

According to a PTI report, ONGC has written to the petroleum ministry saying any disinvestment at this stage may not realise the true value of the company shares.

It further said its payouts to help fuel retailers sell diesel, cooking gas and kerosene at subsidised rates has been steadily rising – from Rs44,466 crore in 2011-12 to Rs56,384 crore in the financial year ended March.

In 2013-14, its net realisation after subsidy payout was a mere $41 per barrel of oil. Out of this, the company has to meet cost of production, which is $42-44 per barrel as well as pay statutory levies like cess, royalty and VAT.

The government will kick off its big-bang disinvestment drive with 5 per cent stake sale in steelmaker SAIL in September, followed by ONGC and power sector undertakings. The union budget for 2014-15 proposes to garner Rs43,425 crore from PSU disinvestment.