The Telegraph
Since 1st March, 1999
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Meet on sale of oil PSUs after legal opinion

New Delhi, Dec. 17: The BJP-led government has decided to postpone a crucial meeting of the Cabinet Committee on Disinvestment where norms and details for selloff in petro majors — HPCL and BPCL — will be finalised. The meeting will be held after the government gets a legal opinion from the attorney general on the need to repeal Acts nationalising these two companies in the 1970s.

However, the disinvestment ministry has already circulated a draft note that advocates sale of 26 per cent stake in Hindustan Petroleum Corporation (HPCL) to a strategic investor and 3 per cent to employees. The note also calls for a sale of 25 per cent stake in Bharat Petroleum Corporation (BPCL) through a public offering and another 5 per cent to employees.

The government has to take the attorney general’s advice as the Opposition pointed out in Parliament that a large number of PSU companies, including HPCL and BPCL, were nationalised on condition that these would be run by the government or its agencies.

The disinvestment ministry had argued that a subsequent Companies Act nullified these Acts but many in Parliament, including noted lawyer Fali S.Nariman, consider this incorrect.

The government had conceded as much some time back when it repealed the Iisco Nationalisation Act before initiating action on divest the government stake in the Burnpur-based steel unit.

The CCD meeting, which could now be held next week, may formalise an informal deal whereby public sector units and cooperatives will be allowed to join the race to bid for HPCL, with some strings attached. However, the disinvestment ministry is still lobbying hard to bar PSUs from bidding as it feels that this would only result in strengthening the stranglehold of the state on the oil sector.

Petroleum minister Ram Naik seems to have convinced most Cabinet colleagues on the need to allow mergers and acquisitions by oil PSUs so that they can emerge as global players. Gail and ONGC are keen to bid for HPCL as is cooperative giant Iffco.

Reliance has already made it public that it is in the run for the oil marketer. Other possible contenders are Royal Dutch Shell, Essar, Kuwait Petroleum (possibly as part of a consortium with Iffco) and Petronas.

Both the sales are expected to generate huge cash incomes for a government faced with rising fiscal deficit. A promised disinvestment fund which will channel the receipts into infrastructure investments and debt repayment is unlikely to be set up next year and the money from these two sales will certainly be used to bridge the fiscal deficit.

Meanwhile, the government has asked the Securities and Exchange Board of India (Sebi) to probe a fall in share prices of BPCL and HPCL just before a CCD meeting on September 7 where it was decided to stay the selloff in the two oil PSUs for three months.

Disinvestment minister Arun Shourie told the Lok Sabha today that the “details of the investigation are awaited”.

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