The GDR float, initially scheduled to hit the road early this year but held back on the advice of the lead managers to the issue, was scheduled to offload 10 per cent of the government's 91.3 per cent stake in Indian Oil.

The centre has already disinvested 5 per cent in the company in favour of its employees in 1995-96.Indian Oil had sought the centre's permission to also float fresh equity, equal to 5 per cent of the company's paid-up share capital of Rs 389.3 crore. The anticipated $800 million GDR issuewould have consequently helped fill the coffers of both the central exchequer and Indian Oil.

The proposal was awaiting a nod from the Union cabinet when the inter-ministerial taskforce, that is monitoring Indian Oil's disinvestment programme, decided to postpone the issue in January this year. The entire GDR package is now being reworked.

A broad thinking in government is that the Rs 12,900 crore oil bonds issued to national oil companies in January should brush up their balance-sheets by converting outstanding dues into investments and so improve their borrowing muscle.Indian Oil has received Rs 6,400 crore of oil bonds, that will fetch an interest of 10.5 per cent per annum.

The collateral security that the bonds offer for borrowings and the company's huge and growing reserves (that have grown seven-fold in the last decade to Rs 9,121 crore) are expected to help Indian Oil mobilise resources for investments and imports. The Rs 55,389 crore-turnover PSU's investment plans for the Ninth Plan period areworth Rs 33,000 crore, of which projects on hand (like pipelines, LPG bottling plants and refineries) should consume almost Rs 13,000 crore.

In addition, as a canalising agency for the centre, Indian Oil has to raise external commercial borrowings (ECBs) every year to pay for oil imports.It used up $2.5 billion of its $2.9 billion external commercial borrowing limit last year to canalise roughly 50 million tonne of crude oil and petroleum products.In January the taskforce went by the advice of the lead managers to the GDR issue, who cautioned that the Southeast Asian currency crisis and the subsequent slump in stock markets could tilt the fate of the GDR issue.

The merchant bankers also felt that a vindication of the oil industry liberalisation programme in the Union Budget could evoke a more favourable response to it.The Union Budget, which reiterated the centre's plans to go ahead with its disinvestment in four public sector enterprises (PSEs) including Indian Oil, also contained predictable sops forthe oil industry.

Oil refining companies like Indian Oil, have been given a 2 per cent concession on the customs duty on crude and a five-year tax holiday for greenfield refinery projects.