The government is hopeful that inter-company sale of equity in the three energy companies -- Oil and Natural Gas Commission (ONGC), Indian Oil Corporation (IOC) and Gas Authority of India Ltd (GAIL) -- will yield about Rs 6,500 crore.

And at least Rs 1,500 crore can be realised from Videsh Sanchar Nigam Ltd (VSNL), Mahanagar Telephone Nigam Ltd (MTNL) and National Aluminium Co (Nalco) buyback of equity from the government.

Through the route of inter-company equity sale, IOC and ONGC will buy 10 per cent of each other's equity from the government. And both will buy 5 per cent of GAIL's equity from the government. Also, GAIL will reciprocate by buying 2 per cent of ONGC's equity from the government.

The petroleum and finance ministries areexpected to move a composite paper jointly for Cabinet's approval for securing inter-company holdings and buyback of equity from the company.

The government does not foresee any problems as a result of the crossholding in the energy companies. ONGC, IOC and GAIL are not exactly competitors and exchange of directors as a result of the crossholdings will not lead to any bad blood, a government official said.

Earlier, the government was hopeful of getting the cash-rich oil companies and the two communications companies -- VSNL and MTNL -- buy back a substantial amount of their equity from the government. But later, the government realised on a closer scrutiny of figures that if these companies extinguish a large part of their equity through buyback, their financials can get jeopardised.

Financial institutions are expected to lend a hand in the disinvestment exercise by warehousing a large number of shares of companies which are on the block. Warehousing will result in the government parking its holdings inthese companies with FIs, which in turn will give a discounted price to the government. Government's critics remark that warehousing is nothing but raising a loan by pledging its shares to FIs.

This roundabout route of disinvestment is labelled as an apology for disinvestment as it will lead to a wider holding of these companies and is not even remotely a step forward towards privatisation of these companies, critics say.