Court battle over refinery privatisation gathers pace

Vol 7, PW 12 (27 Aug 03) People & Policy

Next week sees the beginning of a move that could derail the proposed privatisation of Hindustan and Bharat Petroleum, two Indian state-owned refiners.

On 1st September India's Supreme Court begins hearing a case by the Oil Sector Officers Association, an umbrella body of officers from state-owned oil and gas companies, which argues that only parliament, not the government, has authority to sanction the sale. Early this month, the disinvestment ministry issued a 42-page rebuttal of the union's argument with a fierce defence of its position, arguing that the 1974 Act of parliament nationalising both companies does not bar the government from selling them off again.

"Once, the vesting (of the company) under an Act is complete, the government is free to act in accordance with the dictates of economic policy." Adds the statement: "Where some restrictions on the freedom of the government to take executive decisions was sought to be enforced, specific provisions were made to that effect." As examples, the government cites the Coal Mines Nationalisation Act and the Banking Companies Act: both state specifically that coal mines and banks must remain under government control. Such specific provisions are, "altogether missing" from the Esso and Burmah Shell Acquisition Acts that preceded the nationalisation of HPCL from Esso, and BPCL from Shell, argues the government.

"Further, Article 53(1) read (in conjunction) with Article 298 of the Constitution of India bestows the power of acquisition, holding and disposing property on the Union Government. There is no constitutional requirement to seek any prior or even post facto parliamentary approval for any such acquisition, holding or disposal of property." In a minor concession, the government concedes that: "The propriety of a such a policy may be a matter for parliamentary debate." To conclude, the government is clear that HPCL and BPCL are registered under the Companies Act and their "disinvestment" does not require parliamentary approval.

Let the arguments commence