Unions determined to block sale of HPCL

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

Oil sector unions are unconvinced by the government's defence of privatisation.

Ashok Singh, convenor of the Oil Sector Officers Association, tells this report: "Clause 7 of the Esso Acquisition Act clearly says that 51% shares of HPCL should be with the government or a government owned company." Singh says comparison with the coal mines and banks is inappropriate because, "when Esso (and Burmah Shell) was nationalised, parliament did not anticipate it would be denationalised. Once you have nationalised a company through parliament, denationalisation requires parliaments consent." Singh strongly refutes the government argument that the privatisation policy is dictated by the failing health of state-owned companies.

In its statement, the government stresses that of 230 functioning federal PSUs, 109 are loss-making, with accumulated losses of Rs69, 932cr ($14.57bn). "In spite of strenuous efforts of successive governments, the rate of return of central enterprises has been woefully low - minus 4% - excluding sectors in which government has a monopoly." According to Singh, the comparison is meaningless.

Unlike other PSUs, he says, HPCL and BPCL are "highly profitable" companies. "So the argument about PSUs causing losses to the government does not apply here." Perhaps, but it seems unlikely Singh's argument will convince the courts, faced with a determined effort by the government to throw out the union case as early as possible because, "even the strongest among government enterprises have been sinking into increasing difficulties as the environment is more and more competitive and technological change has become faster." More, the government warns that any suspension of the privatisation process will, "lead to irreparable loss and injury to the economic sentiments in the country" and that some of the presently short-listed bidders might pull out and the same price (as is possible now) might not be realised.

Economics, not politics, argues the government, should dictate the privatisation process.