Indian cabinet clears sale of HPCL and BPCL stakes

Jan 27, 2003 01:00 AM

The Indian government finally managed to break the obstruction over oil sector divestment with the Cabinet Committee on Disinvestment (CCD) clearing the strategic sale of 34 % equity in Hindustan Petroleum Corporation Ltd. (HPCL) and the public float of 35.2 % equity in Bharat Petroleum Corporation Ltd (BPCL).
As part of the compromise between the disinvestment and petroleum ministries thrashed out by Prime Minister Atal Bihari Vajpayee and Deputy Prime Minister L.K. Advani, ONGC will not be allowed to bid for HPCL, while the government will ensure the completion of the Bina and Bhatinda refineries being constructed by the two companies. The disinvestment ministry had earlier put forth the Planning Commission’s view that the projects were not viable because of the current glut in oil refining capacities while the petroleum ministry had insisted that the government had committed itself to complete the two refineries.

The disinvestment ministry was also against allowing public sector companiesto participate in the sell-off process, while the petroleum ministry wanted an exception made of the September 7 decision barring PSUs from divestment for ONGC in the case of HPCL. The new management of HPCL would decide the future of the Bhatinda refinery, disinvestment minister Arun Shourie told. “The refinery will be completed. If the new management is not interested, the government will find other means to complete the project,” he said.
For the Central India Refinery being set up by BPCL at Bina, Shourie said, “If we find that we can get a significantly higher price from the markets by delinking the Bina refinery, we could offer the project to ONGC.”
Although the note circulated by the disinvestment ministry stated that the sell-off process would be completed in eight months, Shourie refused to commit to a time. “Things proceed only till the next obstacle. We will try to complete the disinvestment as soon as possible, but we have not set any time-frame for it,” he said.

The employees of both the oil marketing companies are in for a windfall with the government reserving 5 % equity of HPCL and BPCL for the staff at a concessional price. Shourie said the “balanced decision” was taken at the first available date after the government received Attorney-General Soli Sorabjee’s opinion.
Sorabjee said the government could sell stakes in the two oil marketing companies in exercise of its executive powers. The Acts under which the two companies were nationalised was silent on disinvestment unlike legislation on bank nationalisation that bound the government to retain at least 51 % equity, Shourie said.

The Attorney-General pointed out the government did not require clearance from Parliament even for the disinvestment of Maruti Udyog and National Textiles Corporation as the legislature did not find it necessary to insert such a clause. The government will soon appoint advisors for the two deals.
Asked if the bids received from merchant bankers in August were still valid, Shourie said the ministrywould “think about it in the morning”. Disinvestment Secretary Pradip Baijal said the old bids would be valid in the case of HPCL, but fresh bids would be invited for BPCL as the scope of work had changed. The ministry had asked for presentations for strategic sale of both the companies.

Source: Business Standard
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