So Much For India's Privatization

A government ploy infuriates investors--and hurts reform

To India's government, it was a quick, smart way to raise money. But to critics the move looked like a holdup. Facing a $22 billion budget deficit, the government last month forced the country's three big oil and gas companies--90% state-owned--to buy each other's shares from the state's holdings. The deals involving Indian Oil (IOC), Gas Authority of India (GAIL), and Oil & Natural Gas (ONGC) put $1.23 billion in the state treasury but deprived the companies of precious capital. And although the deals technically reduced the state's holdings, the government remains the companies' major shareholder.

To continue reading this article you must be a Bloomberg Professional Service Subscriber.