Unable to decide the subsidy sharing mechanism with ONGC, the Government is racing against time to seal the big ticket disinvestments of the Maharatna company along with that of Coal India (CIl) before the end of the current fiscal, as global investors have also raised doubts about how the coal behemoth will achieve the ambitious annual production target of 1 billion tonnes.
Sources privy to the development told The Pioneer that though there are no specific time lines, the Government is keen to wrap up its stake sale in the two Maharatna companies before March 31, 2015. In CIl, the Government plans to offload 10 per cent of its stake while in ONGC it aims to shed 5 per cent share. Offloading shares in both the companies will bring around Rs 38,500 crore in the Government's kitty while the total disinvestment target for the current fiscal is Rs 58,425 crore.
Due to the global holiday season in December when Foreign Institutional Investors (FIIs) take a break, the disinvestment exercise is only likely to take place in January 2015. However sources said that in case of ONGC, the Government is yet to take a final call on the subsidy sharing formula for the third and fourth quarters of FY15.
Unless there is clarity on this front, ONGC's disinvestment may not move forward, as according to sources, during the road shows undertaken by the Government in November for the stake sale in the upstream company, investors had raised concerns about uncertainty regarding the subsidy sharing burden.
According to the subsidy sharing formula which was in place till the end of the second quarter of the current fiscal (which ended on September 30), ONGC's share was Rs 26,841 crore. ONGC, as per the aforementioned arrangement, shares 50 per cent of the Government's subsidy burden for selling lPG, kerosene and diesel (before it was decontrolled a couple of months back) at less than market price, and this hurts its profitability.
Now after decontrol of diesel and with global crude prices coming down, the subsidy burden of the Government has lessened, yet it has not taken a call on revising the subsidy sharing formula with ONGC. Sources said that though the Petroleum Ministry is keen to arrive at a final decision on this aspect at the earliest so that ONGC's stake sale can be expedited, it is yet to hear from the Finance Ministry, where the file related to the matter has been sent.
Till the Government arrives at a definitive subsidy sharing formula, ONGC's divestment will have to wait. As far as CIl's stake sale is concerned, sources pointed out that with the company's current fiscal's output pegged at 507 million tonnes, currently it looks improbable for it to reach the ambitious target of 1 billion tonnes by 2019 as outlined by Coal Minister Piyush Goyal.
During road shows undertaken by Coal Ministry officials last month, investors in the US and South East Asia had sought to know as to how CIl will achieve the target. Sources closely associated with developments said that though long ranging reforms have been outlined by the NDA Government for bringing the coal sector back on track, they will take time to fructify and therefore to achieve the 1 billion tonnes a year production target by 2019 looks steep as of now.
Also CIl's unions have threatened to go on strike if the Government goes ahead with the disinvestment exercise. With the new CIl Chairman Sutirtha Bhattacharya set to take charge any day now, sources said that talks between Coal Ministry and CIl unions may take place by first week of January to resolve their concerns regarding disinvestment.