Finance ministry not keen on govt holding in firm getting diluted
NEW DELHI: The country’s biggest petroleum marketer Indian Oil Corporation’s (IOC) plan to put in place an employee stock option (ESOP) scheme may face a hurdle in the ministry of finance since such a move may dilute government holding in the company.
Government equity holding in IndianOil has been coming down due to the merger of its subsidiaries with itself in the past and the ministry of finance has been unhappy.
The IndianOil board had recently approved a 1.5% ESOP scheme and forwarded the proposal to the ministry of petroleum and natural gas.
This can reduce government holding in IndianOil to 80.35% from the current 82.03%.
IndianOil sources said that the company wanted to give 1.5% of its equity capital to its employees in order to “motivate them”.
Oil PSUs have been facing acute attrition problem. “ESOPs can be a mode for retaining employees,” said a petroleum ministry official.
But, according to an official, “The department of public enterprises does not have any guideline on the issue of ESOP in PSUs and, therefore, the government decision will be crucial.”
It would be particularly important for listed PSUs. As per Sebi guidelines, shares issued to employees cannot be traded for one year.
The finance ministry is keen that a positive government decision on the issue should be applicable to other companies like Oil and Natural Gas Corporation, GAIL India, Hindustan Petroleum Corporation Ltd, Bharat Petroleum Corporation and Oil India.
There is no ESOP scheme in any of the oil PSUs, though shares have been reserved for subscription for employees in the past.
The Union government recently decided to do the same in the case of Oil India Ltd that plans to come out with an initial public offer early January.
The ministry of finance has opposed the merger method proposed for BRPL and a Union Cabinet decision on it is still pending.
In an earlier merger involving standalone marketing company IBP, government equity in IndianOil, post merger, reduced to 80.35% from 82.03%.
Already, there’s a proposed move by IndianOil to merge its Assam-based subsidiary, Bongaigaon Refinery & Petrochemicals Ltd (BRPL), with itself. This can reduce government holding to 78.92%, without the ESOP scheme.
The ministry of finance has opposed the merger method proposed for BRPL and a Union Cabinet decision on it is still pending.
This means, with the two mergers, the government holding in the national oil company would reduce by over 3%.
