Moving to privatise BPCL and HPCL

Vol 5, PW 18 (24 Oct 01) Midstream & Downstream
     

If the disinvestment ministry has its way, not just IBP but also Bharat Petroleum and Hindustan Petroleum will be out of government hands three years from now.

Wishful thinking No! We are told the disinvestment ministry has circulated "agenda notes" regarding the 'Disinvestment Plan' (2001-2004) for "consideration of the core group of secretaries on disinvestment." An internal oil ministry note reveals that these proposals "emanate from the prime minister's recent directions regarding thedisinvestment of public sector units". What's the plan "Disinvestment of 30% equity of BPCL and 25% equity of HPCL through the strategic partner route.

This will mean the end of government controlled management." Currently, the government owns 66.2% of BPCL and 51.01% (lowest among all the oil PSUs) of HPCL. If the above proposal is pushed through, the government will be reduced to a minority stakeholder in both companies.

What is the disinvestment ministry's reasoning We read that the disinvestment ministry wants a "competitive market" and opening up of "refining and marketing in oil products" in line with the dismantling of the Administered Pricing Mechanism (due in March 2002). "Therefore, government need not control BPCL and HPCL." But don't rush to celebrate.

Because BPCL and HPCL are in the last group of oil PSUs marked out for disinvestment. Before them, according to the disinvestment ministry note, will come "immediate disinvestment" of 25% government equity each in ONGC and Indian Oil and 15% in GAIL to yield Rs9,579cr ($2bn).