India decides PSUs cannot bid in oil sector sale

Jan 26, 2003 01:00 AM

The Indian government gave the disinvestment process a big push by clearing the stalled oil sector sell off and keeping other state-owned companies out of the process. But it sugar-coated the decision by giving the employees a Rs 600-700 crore parting gift.
After months of bickering between the oil and the disinvestment ministries, the Cabinet Committee on Disinvestment stuck to the compromise formula of selling Hindustan Petroleum to a strategic partner and take the public float route for Bharat Petroleum.

The decision to keep PSUs out means exploration major ONGC and fertiliser cooperatives Iffco-Kribhco cannot bid for HPCL. The CCD raised the share of equity earmarked for the employees to 5 % from 2 % suggested by the disinvestment department. Depending on the stock price at the time of the sale, this means a gain of Rs 600-700 crore for the employees.
The government would retain 12 % in HPCL, offloading 34.01 % to a strategic partner and 5 % to the employees. However, the CCD decidedto include stiff conditions in the share purchase agreement that would effectively give the government powers to block the strategic partner from taking any decision without the government’s nod.

These conditions would bar the new owners from closing down, selling, leasing or disposing of the company’s assets, without consulting the government. There would also bar them from changing the share capital and articles of association or introduce new business not in line with HPCL’s area of expertise.
However, it would retain 26 % in BPCL, offering 35.2 % to the public and reserving 5 % for the employees. The public offering would have both domestic and foreign components.

Source: The Times of India
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