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Petroleum ministry wants firm to retain proceeds, finance ministry seeks funds for govt coffers.
Differences have emerged between the petroleum ministry and the finance ministry over the initial public offer of Oil India Ltd.
Both the ministries agree that the public sector company should float an IPO, but differ on whether it should be for divestment of government equity or for infusion of fresh equity into OIL.
Officials told Business Standard the petroleum ministry wanted the IPO proceeds to go to OIL, which would be expanding its operations both at home and abroad.
The finance ministry wants to use the IPO route to disinvest 15 per cent government equity. In that case, the IPO proceeds will come into the government coffers rather than the company's. An offer of 15 per cent equity will amount to selling 32 million shares. In a price band of Rs 312-375 a share, it can raise Rs 1,000-1,200 crore (Rs 10-12 billion).
The government currently holds 98.13 per cent in OIL, while the remaining equity is held by the company's employees. If the company is allowed to expand its equity by 15 per cent, the government holding will come down to 85 per cent, which will be the case even if government equity is sold.
There was room for infusion of fresh equity in the company, as 16 per cent of its authorised equity are unsubscribed, petroleum ministry officials said. The company has an authorised equity of Rs 250 crore (Rs 2.5 billion), of which paid-up equity is Rs 214 crore (Rs 2.14 billion).
The finance ministry, however, was of the opinion that the company did not need more money as it had been unable to utilise the funds it currently had. Its reserves and surplus stood at Rs 3,854.6 crore (Rs 38.55 billion) at the end of March 31, 2004 after swelling by about Rs 612 crore (Rs 6.12 billion) during 2003-04.
On this, petroleum ministry officials said OIL planned to increase investments. It wanted to double oil production to 7 million tonnes and hike gas output to 10 million standard cubic metre a day.
This will be achieved through improving production from the existing acreages in the Northeast, expanding production from blocks acquired elsewhere in the country and also through acquisition of acreages abroad.
The proposal of Indian Oil Corporation buying government equity in OIL has been put on hold as the government wanted to preserve the distinct identity of OIL, which is closely identified with the sensitive north-eastern region.
"OIL does not stand to gain from a merger with IOC, since the company's focus is primarily on exploration and production activities, where smaller companies world over have a better record," said a senior company executive.
Equity disquiet
