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Feb 15, 2012, 11.44 AM IST | Source: CNBC-TV18

Heavy Ind Ministry in doubt over BHEL stake sale

After many flip-flops, it looks like tomorrow could be decision day for the ONGC disinvestment. But what about BHEL?

MH Khan, Divestment Secretary, GoI

After many flip-flops, it looks like tomorrow could be decision day for the ONGC disinvestment. An Empowered Group of Ministers (EGoM) will meet on Wednesday to take up ONGC’s and BHEL’s proposals, although the Heavy Industry ministry is still reluctant to divest BHEL due to current market conditions.

The Heavy Industry ministry may face pressure from the Finance Ministry. Praful Patel is expected to hold a meeting early Wednesday where a final decision is likely to be taken.

The EGoM will also consider whether the proposed disinvestment should be via a follow-on public offer (FPO) or the auction process for which the market regulator Sebi issued guidelines only recently.

Divestment Secretary MH Khan said, “I am not pinpointing that we will do this or that. We will take all the options before the EGoM and if the EGoM says these are the feasible ones then whatever they will decide we will move on. Unless I get clearance from the EGoM I cannot fix the dates.”

With only a month-and-half left for FY12 to end, the government is making a last ditch attempt at generating nearly Rs 14,500 crore via a 5% disinvestment each in BHEL and ONGC.

Oil Minister Jaipal Reddy said, “We met earlier. This may perhaps be the last meeting before the Budget.”

There's another crucial EGoM meet scheduled on February 24 and that’s for gas allocation from RIL’s KG-D6 field. This EGoM has not met for nearly 18 months, but the big question is - where is the gas to be allocated in the first place? So even though fertilizer and power companies are lining up for gas, RIL’s gas production is expected to fall to a record low of just 27 mmscmd next fiscal.

To make matters worse, the Oil Ministry and RIL are still not seeing eye to eye. Will RIL want to take the risk of putting in more money to hike production, when the government is still deciding what it should do with RIl’s refusal of withdrawing arbitration on cost recovery?

Reddy said that the government may have to send a notice but he wouldn’t like to commit until he gets proper advice from the Law Ministry.

The Oil Ministry is ready with its notice of limiting RIl’s cost recovery by USD 1.2 billion. But Jaipal Reddy is a stickler for procedures and won't send that notice unless the law minister tells him to. All this meanwhile means that RIL’s gas production will continue to fall.

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