The Telegraph
Since 1st March, 1999
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Shourie aggression in selloff blueprint

New Delhi, Dec. 26: Disinvestment minister Arun Shourie has raised the stakes in the battle in the Cabinet over sale of government equity in two oil companies.

In a move that appears to be almost an invitation to brawl to the opponent camp of defence minister George Fernandes and petroleum minister Ram Naik, Shourie is taking the divestment of government holding in Bharat Petroleum (BPCL) and Hindustan Petroleum (BPCL) beyond what had been expected after a meeting of the ministers ranged on either side earlier this month.

That meeting — in the presence of Prime Minister Atal Bihari Vajpayee and his deputy L.K. Advani — had appeared to have settled the ugly fight within the Cabinet over divestment.

The acrimony, it seems ahead of tomorrow’s meeting of the Cabinet committee on disinvestment, may be far from over.

In a revised Cabinet note, Shourie has recommended that a 38.2 per cent stake in BPCL should be sold to the public and a mere 2 per cent offered to the employees.

He has also kept the option of offloading some more of the holding in the American or the European market, reducing the government’s stake to less than 20 per cent.

Shourie’s proposal goes directly against what Naik has been seeking. The petroleum minister has been insisting that 10 per cent should be offered to BPCL employees and the government should continue to have a substantial holding so that it is in a position to thwart a takeover threat. Critics suggest that Naik has been demanding a higher government/employee holding to perpetuate his ministry’s control.

It is also an improvement on what Shourie had earlier indicated in the draft notes, which said 35 per cent would be sold to the public and 5 per cent to the employees.

If Shourie’s suggestion is accepted, more than three-quarters of BPCL shares will be out in the market.

He has also recommended sale of 34 per cent in HPCL to a strategic stakeholder and 2 per cent to employees. Earlier, the government had indicated it would sell 26 per cent to a strategic bidder.

His position has been bolstered by the finance ministry’s stand that a single-stage strategic sale (which means selling to one entity or a consortium at one go) would fetch a higher price. The Cabinet note seeks to cut the government holding to a mere 15 per cent.

The petroleum ministry has been pressing for a two-stage sale on the argument that the global economy is on the upswing and can be expected to be nearer a peak in a couple of years when HPCL could command a higher price.

The committee of secretaries, which met today to clear the proposals that will be taken up by the Cabinet committee, agreed to allow cooperative giants like Kribhco and Iffco, in which the government has a substantial stake, to bid for HPCL. This is being seen as a concession to the anti-divestment lobby.

While a political decision on allowing public sector giants like ONGC to bid for HPCL exists, the Cabinet note is fuzzy on the issue, leaving scope for a compromise with Shourie’s ministry being allowed to sell a higher-than-expected stake in the two oil companies.

Tomorrow’s meeting will also decide the sale of Calcutta-based Balmer Lawrie. Cochin and Hindustan Shipyards, Bharat Brakes and Valves and Hindustan Insecticides are the others on the list.

It is expected to clear a 51 per cent strategic sale in Indian Control Valves and 32.6 per cent in Hindustan Organics, as well as divestment from Nepa, Inland Waterways Ltd and Chefair.

Public sector stocks spiked up ahead of the meeting. HPCL rose sharply on the Bombay Stock Exchange, gaining almost Rs 9.10 to close at Rs 292.60. BPCL shot up in tandem by Rs 2.75 to Rs 214.10.

Balmer Lawrie saw operators taking up positions to make a killing.

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