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Selloff thrust before norms in place

New Delhi, Dec. 9: Disinvestment minister Arun Shourie today formally announced that the government would go ahead with selling management control in Hindustan Petroleum Corporation (HPCL) through an auction to corporate bidders, while it would divest in sister oil retailer, Bharat Petroleum Corporation (BPCL), by selling small share packets to the public.

Sources said that public sector companies ONGC and Gail are likely to be allowed to bid for HPCL as a decision to this effect was informally taken at a meeting of key Cabinet ministers held last week. Petroleum minister Ram Naik hinted as much stating that “petroleum PSUs can submit bids through the ministry. We will make recommendations on these bids to the Cabinet Committee on Disinvestment (CCD).”

However, the sale decision of these two oil PSUs comes even as the government is yet to work out guidelines for divestment in ‘natural asset companies’, which includes oil, iron and steel and other core sector companies.

Differences persist between members of the Union Cabinet on how natural asset companies are to be treated in the divestment process. While Shourie would have liked them to be treated as any other PSU, many of his Cabinet colleagues, including defence minister George Fernandes and Naik, have stressed that they have strategic value to the nation’s defence and cannot be sold off to just any corporate bidder.

The Cabinet also still remains sharply divided over handing over control of PSUs where the company has sold off management control to an asset management company as proposed by Shourie in a suo moto statement in Parliament today. Communications minister Pramod Mahajan and mines minister Uma Bharti are believed to be opposed to this move as it would mean their handing over control of the significant rump shares their ministries hold in vital companies like VSNL and Balco.

Ministers also questioned the wisdom of asset managers being placed on the board of these highly technical companies as the government’s representatives when administrative ministries have experts who understand the subject better and would be better suited to guard the government's interests in them.

In fact, disagreement over how natural asset companies should be handled has resulted in the suspension of disinvestment through the strategic route in Nalco, sources said. However, work on sale of shares in penny packets through a global depository receipt issue and public issue for the home market, which will not affect the government’s management control of the company, is continuing.

In the case of BPCL and HPCL, Naik today remained significantly silent on the validity of sales of these two companies even as a policy decision is yet to be taken, despite repeated queries by newspersons who met him outside Parliament.

Sources said Shourie was taking the line with his Cabinet colleague that these two companies were mere PSU marketing outfits and not PSUs which exploited, processed or controlled oil, a natural asset in any significant manner, and hence did not fit the description as natural asset companies.

Another Shourie announcement made today in Parliament on setting up a Disinvestment Proceeds Fund, however, is receiving support not only from virtually all ministers in the BJP-led Cabinet but also from the Opposition benches.

The fund will be used to finance fresh employment opportunities and investment besides retiring of public debt. This concession on the end use of divestment proceeds was wrung at the informal meeting on disinvestment strategy held last week at the Prime Minister’s residence by the anti-disinvestment lobby within the Cabinet.

Meanwhile, Shourie today said the next CCD meeting on sale of equity in HPCL and BPCL would be held after the Gujarat elections on December 12.

“Everybody is busy with Gujarat elections and proceedings of Parliament. We will seek convenience of Prime Minister Atal Bihari Vajpayee for the meeting,” he said. “But we will start preparing papers now,” he said hoping the divestment in HPCL and BPCL could progress swiftly if there were no obstructions. “If obstacles are put what can happen... Otherwise, we can go very fast,” he said.

HPCL and BPCL were well known companies and bidders would not require very long time for due diligence like in the case of Paradeep Phosphates, he added.

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