IndianOil told to sell off its pipeline business

Vol 23, PW 4 (19 Dec 19) People & Policy

IndianOil’s pipeline division is the latest target of the government's divestment programme - possibly to one or more private players.

This report learns senior IOC management received verbal instructions from the government on December 16 to prepare to sell off its pipeline division. This directive came from the finance ministry and the PMO, side-stepping the oil ministry, which was not involved.

"We have been asked to sell off our transmission business," confirms an IOC source. "Maybe the government needs money to reduce the fiscal deficit or perhaps there is some pressure from private players?" In the first seven month of 2019-20 or by the end of October 2019, India's fiscal deficit crossed $100bn.

"The government wants money and wants it fast," he adds. "Just like Reliance sold its pipeline (to Canadian investor Brookfield Asset Management) IOC’s pipelines could also be sold to a private investor."

In March 2019, Reliance sold its 1459-km East-West pipeline to Toronto-based Brookfield for Rs13,000cr ($1.8bn). For the East-West Reliance pipeline, the price realised was approximately Rs10cr/km ($1.4m).

If you consider IOC has 14,000-km of crude oil plus product pipelines, the government could generate up to Rs140,000cr ($19.75bn). IOC also has around 6000-km of pipeline under planning, implementation or commissioning.

"If half the value of these (upcoming) pipelines is added the government could get another Rs30,000cr (Rs4.2bn) and the total value would be Rs170,000cr ($24bn)."