NEW DELHI, Oct 6- The government today took the first step towards disinvestment in the petroleum sector by approving the sale of government equity in the oil marketing major, IBP Ltd.

The government will sell 33.59 per cent of its holding in the company to bring down its equity to 26 per cent, Disinvestment Minister Arun Shourie said after a meeting of the Cabinet Committee on Disinvestment (CCD).

The CCD, chaired by the Prime Minister, Mr Atal Behari Vajpayee, also decided to reduce government stake in two star trading houses MMTC and STC to 26 per cent from 91 and 100 per cent , respectively. Ten per cent of the 26 per cent government stake in the two companies would be subsequently divested in favour of employees, Mr Shourie said.

He said the disinvestment would be through international competitive bidding and the shares to employees of MMTC and STC would be given under employee stock option at a concessional price to be determined later.

Mr Shourie said the government had also decided to withdraw completely from Bharat Brakes and Valves Ltd. The government equity in the company would be offered to two parties who have evinced interest and also to others through the bidding process.

On the IBP, which has 1500 retail outlets, mostly in northern India, Mr Shourie said the government at present had a stake of 59.59 per cent in the company. The government equity would be sold to a strategic partner. At present, 23 per cent of IBP equity is with financial institutions and banks and the remaining 17.4 per cent is with employees, NRIs and others.

Mr Shourie said the Prime Minister also directed that the process of disinvestment should be made more expeditious and the cumbersome process should be done away with.

“Mr Vajpayee expressed concern over the delays in the process of disinvestment and asked the DoD to cut down the number of involved procedures from about 20 now to three”, he added.

Under the new dispensation, the DoD would prepare a note which would be sent to the ministries concerned for comment. The Committee of Secretaries would then deliberate on the issue and make recommendations to the DoD, he said .The DoD would then go to the CCD for final approval, he added