NEW DELHI (Reuters) - A panel of ministers has approved the sale of a 10 percent stake in state refiner Indian Oil Corp (IOC.NS) to two state exploration firms, a move that will help the cash-strapped government raise funds to narrow its budget deficit.
Oil and Natural Gas Corp Ltd (ONGC.NS) and Oil India Ltd (OILI.NS) will buy the stake, Oil Secretary Vivek Rae said, with the transaction likely within the next week or so.
The deal will be through a block deal on the stock exchanges, Oil Minister Veerappa Moily told reporters.
The government, which has a 79 percent stake in IOC, expects to garner between 48 billion to 50 billion rupees, Rae said.
New Delhi has been pushing for the sale of the IOC stake, along with a 5 percent stake in miner Coal India (COAL.NS), for months and had even organised roadshows for overseas investors, but disagreements among ministries and a depreciation in the rupee stymied the efforts.
The stake sales are part of a plan to raise $6.4 billion this fiscal year through divestments in state firms, but so far the government has only raised around $500 million through this route.
India's slowing economy and rising subsidies on food and fuels have pushed the government into a corner, with the fiscal deficit for the April-November period rising to $82.3 billion, or nearly 94 percent of the full-year target.
Earlier this week, Coal India agreed to pay a surprisingly large interim dividend of 29 rupees a share, that will amount to $2.7 billion for the government's 90 percent stake in the company.
The modalities of the IOC stake sale are being worked out, and the boards of ONGC and Oil India will decide on who will buy how much, oil secretary Rae said. The decision will depend on how much cash each company holds.
ONGC will be comfortable buying up to 5 percent stake in IOC, its chairman Sudhir Vasudeva told televsion channel ET Now.
Ahead of the announcement, shares in IOC closed 1.3 percent higher at 212.25 rupees in a flat Mumbai market. ONGC and Oil India shares ended down 1.7 percent and 0.8 percent respectively.
(Reporting by Rajesh Kumar Singh; Writing by Prashant Mehra; editing by Malini Menon and Jane Merriman)
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