ONGC banned from HPCL sale

Vol 6, PW 23 (29 Jan 03) People & Policy

CONGRATULATIONS ARE in order for the government: it has banned ONGC and IOC from the sale of Hindustan Petroleum.

Only these two cash rich state companies have the financial muscle to participate; their exclusion has thankfully opened the door to serious contenders from overseas. Shell, BP, ChevronTexaco and TotalFinaElf all returned home disillusioned after the IBP sale.

Sunday's decision to exclude ONGC will give them renewed confidence to try again. After the IBP fiasco most foreign oil companies concluded that the government's privatisation mantra was little more than an officially sanctioned scam to transfer control of one state company to another.

ONGC's exclusion from the bidding tells us the government is at last listening to the market. More, it has belatedly realised privatisation can painlessly infuse hundreds of millions of badly needed dollars into the Indian economy instead of simply shifting rupees from one pocket to another by selling to ONGC.

India is reminded on a daily basis how it lags China in the race to win Foreign Direct Investment. For once the government has taken note.

Another equally important element of Sunday's cabinet decision is that the new owners of both companies will not be compelled to continue two redundant refinery projects: Bharat's 6m t/y refinery at Bina in Madhya Pradesh or Hindustan's 9m t/y refinery at Bhatinda in Punjab. "It will not be mandatory on them to take on these projects," reveals a source.

"These projects will not be pre-conditions on the new owners." Yet despite its minority stake, the government wants to exercise control to prevent the new owners stripping assets.