Govt plans to cut stake in IOC

India plans to reduce its stake in Indian Oil Corp. to below 51% while ensuring the government and state-run companies retain control of the nation's largest oil refiner.

Prime Minister Narendra Modi's cabinet will consider, asearly as next week, a proposal to sell shares in some companies, includingIndian Oil, to below 51%, the people said, asking not to be identified as theplan is not public. India directly holds 51.5% in Indian Oil, and another 25.9%through state-run Life Insurance Corp. of India, and explorers Oil &Natural Gas Corp. and Oil India Ltd.

Sluggish revenue collections have left Modi's administration with little choice but to push ahead with a plan to raise a record 1.05 trillion ($14.6 billion) through asset sales in the financial year through March. A slippage will put the government's goal of capping its budget deficit at 3.3% of gross domestic product at risk, and prompt rating companies to put India's credit score on a path for a downgrade to junk.

The government can sell as much as 26.4% it's holding in Indian Oil – valued at about ₹33,000 crore – and still retain indirect control. Finance ministry spokesman Rajesh Malhotra could not be immediately reached for comment.

The South Asian nation is likely to start selling shares inIndian Oil through an exchange-traded fund in January, according to the people.The ministers' panel is also expected to take up other crucial proposals suchas privatization of Bharat Petroleum Corp., Shipping Corp. of India andContainer Corp. of India, they said.

Finance Minister Nirmala Sitharaman, in her budget speech, announced a plan to lower direct holdings in some state-run companies below 51% on a "case-to-case basis." The government later identified the biggest energy companies such as Indian Oil, ONGC, NTPC Ltd. and GAIL India Ltd. as probable candidates for such reductions.

Shares of Indian Oil have dropped 3.8% this year. Thebroader benchmark S&P BSE Sensex has risen 11.4% in the period.Indian Oil, along with its unit ChennaiPetroleum Corp., operates 11 refineries, controlling more than 35% of thenation's total crude oil processing capacity. It's also India's biggest fuelretailer, owning about half the country's refilling stations.