<div>India is likely to delay share sales in state-run oil firms ONGC and Indian Oil Corp by up to six months as low crude oil prices have hit their value, denting the chances of raising about $11 billion from such sales this financial year, two government sources said.</div><div> </div><div>The government hopes to sell shares in these companies to raise nearly $3.5 billion, roughly one-third of the total annual share-sales target of about $11 billion, which is crucial to meet a fiscal deficit target of 3.9 percent of GDP in the 2015/16 fiscal year that started on April 1.</div><div> </div><div>New Delhi has missed its target for partial privatisations for the past five years and now wants to break with the usual practice of bunching up sales towards the year-end.</div><div> </div><div>A shortfall in receipts from stake sales and taxes has led to cuts in public spending of about $48 billion in the past three years, which has slowed economic recovery.</div><div> </div><div>The government had originally intended to sell off part of state refiner IOC and oil and gas explorer ONGC in the financial year that ended on Tuesday but it ran into opposition from the oil ministry.</div><div> </div><div>"It is not the right time to divest shares," said A.K. Sharma, IOC's finance director.</div><div> </div><div>IOC incurred inventory losses of about $2.5 billion between April and December because it did not hedge against falling crude prices, down by half since June last year.</div><div> </div><div>ONGC is hurting because, to help meet the federal fiscal deficit target, the finance ministry is making it pay for a high level of subsidies, despite the low oil price.</div><div> </div><div>The subsidy burden on oil companies has hurt valuations, oil ministry officials say.</div><div> </div><div>IOC's share price has rallied about 10 percent this year following a fall in inventory losses but it is still 7 percent lower than in September last year.</div><div> </div><div>"Indian Oil Corp is not in a good shape. We will have to wait for at least six months before shares could be sold in the market," a senior government official with knowledge of the matter told Reuters.</div><div> </div><div>Sharma said the deregulation of diesel prices and lower borrowing costs had trimmed IOC's losses in part, and it planned to diversify in other sectors to cushion against volatile prices.</div><div> </div><div>ONGC's share price has fallen more than 11 percent this year, while the benchmark BSE Sensex has risen 3.4 percent.</div><div> </div><div>Analysts said waiting for a rally in the stock markets before selling big-ticket stakes could be a mistake, since investors are likely to remain cautious for some time about developments in the Middle East and worries over U.S. rate rises.</div><div> </div><div>"It might be an uphill task for the domestic stock market to do a replay of the scale of gains seen last year," said Radhika Rao, an economist with DBS Bank in Singapore.</div><div> </div><div>"In the absence of another strong bull run, achieving the divestment target might prove to be a challenge if more big-ticket sales are not brought forward," she said.</div><div> </div><div>Merchant bankers engaged by the government said a recent decision to lower domestic gas prices and the slump in crude prices will have a bearing on potential receipts if the government decides to go ahead.</div><div> </div><div><strong>April Stake Sale?</strong></div><div>Another official said the government may kick-start the process with the sale of shares in a smaller company such as Power Finance Corp or engineering equipment maker Bharat Heavy Electricals.</div><div> </div><div>"If market conditions remain stable, we may sell a stake in a small company in April," the official said.</div><div> </div><div>So far, Finance Minister Arun Jaitley has cabinet approval to sell shares in 10 companies, including a 10 percent stake in IOC and 5 percent in ONGC.</div><div> </div><div>Other companies on the list include National Minerals Development Corp and National Aluminium Co Ltd (NALCO).</div><div> </div><div>(Reuters)</div>
