New Delhi, Oct. 3: Thwarted from divesting government stakes in two petroleum companies, Arun Shourie today trumped his opponent’s hand by proposing to split the much bigger Indian Oil and sell its retail business.
A meeting of the cabinet committee on disinvestment — called today ostensibly to discuss Hindustan Petroleum (HPCL) and Bharat Petroleum (BPCL) whose selloff was stalled by a court order — ended up mandating the disinvestment and petroleum ministries to work out a plan to carve Indian Oil.
Ram Naik, the petroleum minister and strong opponent of privatisation, was left open-mouthed in surprise by the ingenuity of disinvestment minister Shourie’s move, which seeks to breathe life back into the privatisation programme.
Last month, the Supreme Court ruled against divestment from HPCL and BPCL, saying that since the two were nationalised through acts of Parliament, they could be privatised only through a similar measure.
The ruling was seen as a setback to Shourie, whose job is divestment, and a victory for Naik — positions that changed dramatically at today’s meeting chaired by Prime Minister Atal Bihari Vajpayee.
Prepared for the meeting, the cabinet note had only spoken of the options on HPCL and BPCL — whether to seek a legislative remedy or a judicial review.
Although Naik did raise objections, he had not come with a cogent argument and was simply overwhelmed by the support Shourie had obviously organised with heavyweights like finance minister Jaswant Singh, foreign minister Yashwant Sinha and law minister Arun Jaitley.
“We (the ministries of petroleum and divestment) will work out a plan to split it into two or three parts within three months. The idea is to retain those portions of the oil major which the government needs to control either as a (rump) company or as part of HPCL-BPCL. The other portion (comprising petrol pumps) can be sold off as two companies — one through a strategic sale and the other through a public offering,” Shourie said.
After being thrown off guard, sources close to him said, Naik went to work, speaking to deputy Prime Minister L.K. Advani, who was present at the meeting.
His next destinations are expected to be anti-privatisation ministers like Murli Manohar Joshi and George Fernandes.
Indian Oil controls roughly half the petroleum retail network in the country — the rest is controlled by HPCL and BPCL. Its other business is refining, which the government will retain.
The company was not set up under a separate statute of Parliament but under the Companies Act of 1956, which does not bar privatisation.
But there is a portion of the Supreme Court on HPCL and BPCL which leaves scope for challenges to the Indian Oil sell-off bid. The court had asked if companies set up out with money from the Consolidated Fund of India could be sold without reference to Parliament.
An upbeat Shourie, however, claimed that passage of a budget that cleared a divestment component could be construed as parliamentary approval.
Today’s decision was all the more surprising as an earlier cabinet meet had decided that the government would not privatise Indian Oil, Oil and Natural Gas Corporation and Gas Authority of India for strategic reasons.
The meeting also cleared the sale of six companies set up under the Companies Act. They include a clutch of Calcutta firms — Balmer Lawrie where 61.8 per cent stake will be sold through a strategic sale, Tide Water Oil (27 per cent), Hooghly Printing Works (100 per cent) and Hindustan Newsprint (74 per cent).
A 51 per cent stake in Engineers India Ltd and 65 per cent in State Trading Corporation will be sold.
Vapayee asked his colleagues to consult other political parties, including the opposition Congress, to explore the possibility of a consensus on a legislation, which will take care of the Supreme Court judgment on HPCL and BPCL that also covers all companies set up under acts of Parliament.
He told Shourie to consult the government’s legal machinery to check out the judicial options.
“We were asked to work on all options simultaneously,” Shourie said, adding: “There is no question of a confrontation with the judiciary in doing so.”