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OIL premium for Numaligarh stake

New Delhi, Feb. 7: Oil India Ltd (OIL) is expected to pay around Rs 130 crore to pick up an additional 13.65 per cent stake in Numaligarh Refinery Ltd (NRL). The value of each Rs 10 share of NRL has been worked out at Rs 13.11.

The value of the share has been calculated using the net asset value method. OIL is likely to get two berths on the board of Numaligarh Refinery once its stake goes up to 26 per cent.

The proposal has been cleared by the finance ministry and will be placed before the Cabinet for approval soon.

The petroleum ministry had earlier approved OIL’s proposal to raise its stake in Numaligarh Refinery from 12.35 per cent to 26 per cent.

OIL will pick up the Oil Industry Development Board's 12.34 per cent stake in the paid-up capital of Numaligarh Refinery and another 1.31 per cent share from Bharat Petroleum (BPCL).

BPCL will continue to hold an over 60 per cent stake in the refinery and, thus, continue to exercise management control over the refinery although OIL will now also have a greater say.

The government’s decision falls short of OIL’s demand to take over management control of NRL with a 51 per cent stake. However, it is considered significant as it recognises the fact that OIL could move into the downstream segment at an opportune time and puts it on the same footing as upstream oil giant ONGC which has acquired Mangalore Refineries and Petrochemicals Ltd (MRPL).

A senior OIL official told The Telegraph that with a greater representation on the board, “We will gain a hands-on experience in running the downstream business which will strengthen our case for increasing our stake to 51 per cent in future”.

The government feels that since BPCL continues to remain in the public sector with the Supreme Court decision having stalled the disinvestment process, Numaligarh Refinery will remain “in safe hands”.

The refinery was born out of the Assam Accord and its location, although beneficial for the economic development of the region, is not ideal given the limited demand for petrogoods in the Northeast. The evacuation of products poses a major problem.

Sources feel that BPCL has a very good brand image and a strong nationwide marketing network and so it is in a better position to market NRL products. Since BPCL is a navratna company it can also take quicker decisions as it enjoys more financial power.

OIL had staked its claim for management control of the refinery as most of the upstream oil major's oilfields are situated in the Northeast and it would like to move up the value chain by entering the downstream oil refining business.

The issue picked up momentum when MPs from Assam met the Prime Minister in August last year. The MPs were keen that Numaligarh Refinery be handed over to OIL. They had also met petroleum minister Ram Naik.

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