The Telegraph
Since 1st March, 1999
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Oil twins back in selloff court
- Divestment panel meets next week; refinery hive-off also on the agenda

New Delhi, Jan. 24: The Cabinet Committee on Disinvestment (CCD) will meet next week to take up the controversial sale of oil majors Hindustan Petroleum Corporation (HPCL) and Bharat Petroleum Corporation (BPCL) which are likely to go through only in the next fiscal.

A plan put forward by petroleum minister Ram Naik to hive off Bhatinda and Bina refineries from the two companies before the selloff will also be considered.

With the attorney general saying that the government does not need to repeal the Acts under which these companies were nationalised but can just issue a gazette notification, the road to the real sell-off battle is now open.

But the AG’s opinion also means that the selloff, even after Cabinet clearance, cannot be achieved this fiscal. The gazette notification has to be laid in Parliament for 30 working days. During this time either of the two Houses can decide to bring in motions disapproving it, which could delay the process considerably.

However, disapproval motions, if any, are unlikely to defeat the bid to sell these two companies as such motions need to be passed by both Houses. The BJP-led alliance has a majority in the Lower House of Parliament and any such motion would obviously be defeated.

Even then the two big-ticket sales are unlikely to go ahead this fiscal.

Both the sales are expected to generate huge cash income for the government. While the market capitalisation of HPCL stands at Rs 10,000 crore, the market cap of BPCL is at about Rs 9,000 crore according to a cabinet note put by the ministry of petroleum.

But if the sale comes through next year, then the money will have to be channelled into infrastructure investments and a debt repayment fund from where it cannot help the government balance its books.

Disinvestment ministry top brass, however, are still happy with the deal as the other alternative of repealing Acts of nationalisation would have meant running through the gauntlet of an Opposition-led Upper House.

A CCD meeting on the issue slated for January 25 cannot be held as finance minister Jaswant Singh is in Davos. However, top disinvestment ministry officials said the meeting will be held “next week after consultation with the PMO”.

The petroleum ministry will also take up with the CCD its plan to hive off the Rs 9,806-crore Bhatinda refinery from HPCL and the Rs 6,354-crore Bina refinery from BPCL. Since the selloff could disturb work on these two refineries, the ministry will be pleading for their hiveoff before the divestment process starts.

The real reason behind this plea is also to deny the strategic buyer who picks up stake in HPCL and the future market raider who manages to wrest control of BPCL, control over these two projects.

Besides expected objections from the disinvestment ministry to this move, the Cabinet will also focus on two battles — one over allowing PSU oil majors to bid for HPCL. Although a political consensus on this seems to have been achieved at previous informal consultations, sources said disinvestment minister Arun Shourie will not agree to this without a fight.

A committee of secretaries has already agreed to allow cooperatives like Iffco to bid for PSUs being put up for sale.

The other expected battle will be over Shourie’s bid to sell higher stakes in both BPCL and HPCL. The disinvestment minister has already circulated a revised Cabinet note recommending sale of 34 per cent stake of Hindustan Petroleum Corporation to a strategic stake holder and a 2 per cent divestment to employees through a stock option scheme. He has also said that a 38.2 per cent stake, should be sold in BPCL through a public offering, with a mere 2 per cent to be offered to employees.

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