The Telegraph
Since 1st March, 1999
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OIL float faces Left hurdle

New Delhi May 20: The initial public offering of Oil India Ltd may get delayed because the Left has opposed the dilution of the government’s stake in the PSU.

“It could take at least six months, if not more, for the official approval to come through as the government does not want to move ahead without a consensus with the Left parties on the issue,” sources said.

The Left fears such offers from PSUs will eventually lead to their privatisation.

OIL had proposed to sell 10 per cent of its equity and was expecting the mandatory approvals to arrive by April. The government holds 98 per cent equity in the PSU.

The upstream oil exploration and production company is planning to mop up at least Rs 1,500 crore through the offer.

The plan is to utilise the proceeds to fund its exploration and production activities in the next five years.

Acquisitions of small and mid-sized exploration and production companies are part of the company’s agenda.

“We are keen on expanding our overseas portfolio. We are scouting for opportunities with our partner Indian Oil Corporation,” a senior company official said.

The OIL and Indian Oil combine is looking to acquire assets in Africa, West Asia and South America.

An SoS has recently been sent by OIL to the petroleum ministry over falling profits in the last financial year.

Sources said the PSU reported a net profit of Rs 1,690 crore in 2005-06 but expects the profit to slide below Rs 1,600 crore in 2006-07.

The PSU fears any fall in the profit will affect the IPO since a weak bottomline will hit the offer price.

OIL’s grouse is over the payouts to Indian Oil and Bharat Petroleum.

It not only has to compensate the duo for their losses on kerosene and cooking gas sales but also has to pay the sales tax and bear the transport cost on the crude it sells to them.

The tax and transport relief is because of rules on crude sales in the Northeast. Producers will have to bear the transport cost and the sales tax obligation of the buyer if the crude is sold within the region.

This is not applicable on the crude sold outside the region.

The rules do not affect ONGC, the other producer in the region, since it sells 95 per cent of its crude to the rest of India.

OIL wants to be treated on a par with ONGC.

It wants the government to waive the Rs 200 crore incurred yearly on the sales tax and transport bill.

The waiver will help OIL earn much higher profit in this fiscal.

Though the petroleum ministry has set up a panel in this regard, OIL wants the government to act immediately. Any relief will be reflected in its fourth-quarter results, which are due soon.

OIL officials feel ONGC carries a greater clout within the ministry because of its bigger size. “We should be treated on an equal footing,” they said.

The Reserve Bank of India has allowed navratna PSUs to invest in unincorporated oil companies abroad under the automatic route, a move that will help these companies acquire oil and gas blocks overseas.

The guideline will exempt navratna PSUs — ongc, hpcl, bpcl, gail and ioc — from seeking prior approval of the rbi to invest in oil companies abroad.

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