The government has postponed until fiscal year 2011/12 (April-March) the follow-on public offering of shares in state-owned Indian Oil, the country's biggest petroleum refiner and oil-marketing company. The government, which holds a 78.9% stake in Indian Oil, had planned to sell a 10% stake by the end of January 2011. It cited the recent surge in oil prices as the main reason for the postponement: downstream oil-marketing companies in India tend to lose money when crude oil prices climb. For the government, which operates a fuel-subsidy regime, state-owned firms such as Indian Oil are instrumental in keeping retail energy prices artificially low. Given that inflation is still a major concern, these companies-despite a partial deregulation of fuel prices in June-are not allowed by the government to raise prices in line with international price increases.

The proceeds from the share sale, estimated at Rs200bn (US$4.4bn), were to be used to revive a shelved petrochemicals project in Paradip, in the state of Orissa, and to build a gas-importing facility at Ennore, in Tamil Nadu. The revenue would also have allowed the government to reach its target of Rs400bn from part-privatisations of state-owned enterprises in 2010/11. In the first nine months of 2010/11 it raised more than Rs200bn from such divestments, the two largest being sales of 10% stakes in Coal India (bringing in Rs152bn) and Power Grid (realising Rs74bn). The government now intends to sell a 5% stake in the Oil and Natural Gas Corporation (ONGC), a state-owned upstream oil company (which, unlike India's downstream operators, tends to benefit from rising international crude oil prices). The cabinet approved the share offer on December 1st. The sale will reduce the government's stake in ONGC to 69.1% and is expected to raise Rs110bn-130bn. The fate of other proposed part-privatisations, including follow-on public offerings in the Steel Authority of India and Hindustan Copper, is unclear.