OREANDA-NEWS. March 11, 2011. The government has deferred the share sale of state-owned Oil and Natural Gas Corporation (ONGC) to the second half of 2011 following a faux pas in the appointment of independent directors on the company board.

However, the petroleum ministry on Thursday, cleared the appointment of T Chandrasekharan, professor at Indian Institute of Technology, as an independent director on the board of ONGC to meet the requirement of capital market regulator Sebi. The appointment will now have to be cleared by the Prime Minister’s Office.

The government plans to sell 5%, or 427.77 million equity shares, through the follow-on public offer (FPO) to raise up to R12,000 crore. “The share sale was to open on April 5, but has now been deferred. It is now likely in the second quarter of 2011-12,” an official with direct knowledge of the matter said. As of now, ONGC does not meet market regulator Sebi’s listing norm of having an equal number of functional and independent directors and the government had planned to withdraw both its nominee directors on the board to push the FPO through.

But this move would have led to ONGC losing its coveted Navaratna status that gives the company board autonomy to approve an investment of any size on projects and powers to invest up to R1,000 crore in a joint venture company.

According to the norms, a Navaratna board can exercise its limitless powers only when it has government-nominated directors on board. Upon withdrawal of such directors, ONGC will have to seek nod of the Public Investment Board (PIB) for any spending of over R100 crore, the official said.

“The consequences of withdrawing government directors were too grave and so the it has been decided to make regular appointment of independent directors and till such time, the FPO will be deferred,” he said.

A search committee will be appointed and suitable persons appointed by the Cabinet Committee on Appointment (ACC), he said adding the process may take 2-3 months. ONGC has six functional directors, besides the chairman.