India’s cabinet will consider the sale of 10 percent in Indian Oil Corp. (IOCL), the nation’s biggest company, as it seeks to raise money to narrow a budget deficit, said two officials familiar with the matter.
The Cabinet Committee on Economic Affairs will discuss the sale tomorrow, the people said, asking not to be identified as they aren’t authorized to speak on the subject. The 10 percent stake is worth 54.8 billion rupees ($927 million) as of yesterday’s closing share price.
Finance Minister Palaniappan Chidambaram is seeking to narrow the fiscal deficit to 4.8 percent of gross domestic product in the year ending March 31, the lowest budget gap in six years, by raising money from asset sales and reducing subsidies on commodities such as fuels. The government plans to collect 400 billion rupees from stake sales this financial year, 67 percent higher than what it received last year.
Indian Oil shares have declined 17 percent this year, compared with a 3.3 percent gain in the benchmark S&P BSE Sensex (SENSEX) index. The stock fell 1.1 percent to 223.30 rupees as of 2:04 p.m. in Mumbai trading.
Indian Oil and its state-run rivals Bharat Petroleum Corp. (BPCL) and Hindustan Petroleum Corp. (HPCL) sell diesel, kerosene and cooking gas below cost to curb inflation. They are partly compensated by the government and by state-run oil producers including Oil & Natural Gas Corp. that give them discounts on crude purchases.
The government in January allowed the state-run refiners to raise prices of diesel, which accounts for more than 50 percent of all oil products consumed in the country, by half a rupee every month till the deficit on its sale is wiped out. Rates have been increased at least six times since then.
The government owns 79 percent of Indian Oil, while Oil & Natural Gas has 8.8 percent, according to data compiled by Bloomberg. The refiner’s sales increased 3.1 percent to 4.5 trillion rupees in the year ended March 31, while profit rose 27 percent to 50.1 billion rupees.
To contact the editor responsible for this story: Sam Nagarajan at firstname.lastname@example.org