The government is planning to sell 20 per cent of its equity in Indian Oil Corporation and 5 per cent in Oil and Natural Gas Corporation through public issues, to shore up state finances.
The sale is expected to yield around Rs 13,000 crore (Rs 130 billion), which will be used to bridge the divestment target for the current fiscal.
Petroleum Secretary B K Chaturvedi said he would meet Divestment Secretary Dhirendra Singh on Friday to finalise the plans.
Selling equity in IOC and ONGC overseas was not possible during the current fiscal since listing requirements could not be fulfilled in such a short time, Chaturvedi said.
"Only domestic offering is possible, and the Cabinet will decide on the divestment in public sector oil firms by January," he said.
The sale of government equity in the two blue-chip oil companies is among the alternatives the petroleum ministry has listed in its option paper prepared on the instructions of the Cabinet Committee on Divestment.
The Cabinet had sought the options after the privatisation of Hindustan Petroleum and Bharat Petroleum ran into legal problems.
The paper has, however, not suggested the sale of IOC's marketing division by hiving it off from the parent company.
Chaturvedi said the oil ministry had also moved a Cabinet note to dissolve the cross-holdings between IOC, ONGC and Gail (India) Ltd.
While IOC holds 9.62 per cent in ONGC and 4.8 per cent in Gail, ONGC holds 9.11 per cent in IOC and 4.82 per cent in Gail. Gail holds 2.4 per cent in ONGC.
These companies were demanding that the cross-holdings be unlocked to increase their liquidity, Chaturvedi said.
He, however, said the government was yet to decide whether to sell the government's equity in IOC and ONGC, or to dissolve the cross-holdings first.
