IOC divestment unlikely this fiscal; pricing decision eyed

The much-anticipated divestment of Indian Oil Corporation (IOC) may not see the light of the day. The empowered group of ministers (EGoM), which met today, failed to convince the oil ministry to go ahead with the divestment plan.

The rift between the oil ministry and the finance ministry on the issue is well known, and the impasse will affect the government's plan to close in on to the divestment target for this fiscal.The oil ministry is very much opposed to the Indian Oil Corporation (IOC) divestment as the share price is languishing at a five year low. There are major overhangs on the stock. The under- recoveries are very high as crude prices are going up. This is also the one year where we have seen the rupee depreciate to its lowest level ever. That is why oil ministry has been not in favour of this divestment.

Furthermore, there has also been uncertainty over whether the petroleum products would be priced according to export parity pricing (EPP) or import parity pricing (IPP).

Interestingly, about two hours before the EGoM meet, the oil secretary announced that as early as next week a cabinet note will be floated with the Kirit Parikh committee recommendations on petroleum product pricing. Kirit Parikh had ruled in favour of the oil ministry and import parity pricing. So, the cabinet is going to have the final decision.