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Government considers selling 5 per cent stake in ONGC

The government will decide next month on the sale of a $3-billion stake in state oil firm Oil and Natural Gas Corp (ONGC), in a major test of whether Prime Minister Narendra Modi can follow through on reforms outlined in his maiden Budget.

Mr. Modi won May’s Parliamentary election by a landslide with a pledge to create jobs and revive Asia’s No. 3 economy, which is suffering from weak growth and high inflation.

Yet Finance Minister Arun Jaitley’s first Budget last week drew criticism that his fiscal arithmetic did not add up. Capitalising on a record-breaking stock market run to complete asset sales could help him balance the books.

The government will decide in August whether to sell a 5 per cent stake in ONGC, a senior Oil Ministry official said, in a deal that would be worth $2.9 billion at current market prices.

“The department of divestment has floated a note seeking our comments for a 5 per cent stake sale in ONGC,” the official, who has direct knowledge of the matter, told Reuters on Tuesday.

An official at the Finance Ministry, home to the divestment department, said the government was interested in selling stakes in ONGC and other state companies given their high market valuations. He did not elaborate.

If completed, the sale would raise more than a quarter of the $10.5 billion (Rs. 63,105 crore) target for asset sales announced by Mr. Jaitley for the fiscal year to March 2015.

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