The government is weighing the option of allowing Oil and Natural Gas Corporation, Indian Oil Corporation [Get Quote] and GAIL (India) Ltd to sell their cross-holdings through public offers.

The petroleum ministry has moved a Cabinet note on this but has not suggested routes for selling the shares.

"All we have said is that the companies may be allowed to sell the shares in consultation with the government. The government will examine the best route for the sale," a ministry official said.

The other options being considered by the petroleum ministry included buyback of shares, selling to banks and financial institutions and selling in the secondary market in small lots, officials added.

IndianOil holds a 9.6 per cent stake in ONGC [Get Quote], which, in turn, has a 9.1 per cent stake in India's largest oil marketing company. GAIL has a 2.4 per cent stake in ONGC. ONGC and IndianOil also own 4.8 per cent each in GAIL. 

The sale of the cross-holdings will help Indian Oil--burdened with under-recoveries due to its inability to raise product prices in line with the international crude oil price movements -- to meet its investment requirements.

Last month, the petroleum ministry had cleared the proposal in principle. But the move requires Cabinet approval because  the shares have been acquired following a decision of the Cabinet.

Based on Friday's closing prices on the Bombay Stock Exchange, Indian Oil is expected to generate over Rs 15,000 crore (Rs 150 billion) from the sale of its cross-holdings, with the sale of ONGC shares like to generate Rs 14,000 crore (Rs 140 billion).

GAIL's holdings in ONGC will fetch it Rs 3,500 crore (Rs 35 billion). ONGC can raise around Rs 5,700 crore (Rs 57 billion) from the sale of its IndianOil and GAIL shares.

"While we have carried out an internal analysis, finance ministry inputs will be crucial though the move will not affect government shareholding," a petroleum ministry official said.

Officials said the boards of the oil companies would meet, once the Cabinet approved the proposal, to decide on the timing of the sale and the quantum of shares. IndianOil is expected to be the first to be allowed to sell its ONGC and GAIL shares.

MUTUAL BONDS Indian Oil holds a 9.6% stake in ONGC ONGC has a 9.1% stake in Indian Oil GAIL holds 2.4% shares in ONGC ONGC and Indian Oil own 4.8% in GAIL