PSUS may be asked to take part in BPCL disinvestment

the process, according to the officials.

“It is also possible that a consortium of public sector companies, led by either ONGC or IOC, could bid for the government’s stake in BPCL. However, it could be the last resort and proposed to be exercised only if disinvestment of the company to private entities would appear difficult within this financial year,” one of the officials mentioned above said.

The second official said the government may adopt the model it chose in the case of Hindustan Petroleum Corporation Ltd (HPCL) to offload its stake in the last quarter of 2017-18. In January 2018, in an off-market deal, ONGC acquired the government’s entire stake (51.11%) in

HPCL for ₹36,915 crore.

“Such transactions also attract minimum resistance as the controlling stake of one PSU [public sector undertaking] is transferred to another PSU,” the second official said.

Email queries sent to the finance ministry, the Department of Investment and Public Asset Management (DIPAM), the Ministry of Petroleum and Natural Gas, IOC and ONGC did not elicit any response.

The officials quoted above pointed out that the government was left with just three months to achieve the disinvestment target of ₹1.05 lakh crore, which could prove to be one of the crucial revenue streams to contain the fiscal deficit at 3.3% of the gross domestic product (GDP) as per the 2019-20 budget.

The interim budget presented on February 1 set a disinvestment target of ₹80,000 crore for 2019-20. While presenting the full budget for 2019-20 after the Lok Sabha elections, finance minister Nirmala Sitharaman, on July 5, raised the disinvestment target to ₹1.05 lakh crore.

The government’s direct and indirect tax collections are not robust, mainly because of the economic slowdown, and they may not act as a surplus to cover up for a shortfall in the disinvestment target.

India’s GDP grew 4.5% in the July-september quarter (the second quarter of fiscal 2019-20), the slowest pace of expansion since March 2013.

It appears difficult for the government to disinvest companies such as BPCL in such a short span of time, and also get the proceeds of sale by March 31, 2020, a disinvestment expert said requesting anonymity. “In this scenario, sale to state-run companies could be explored,” he said.

Niranjan Hiranandani, president, The Associated Chambers of Commerce and Industry of India (ASSOCHAM), said, “Yes, It is possible to do the sale, but it looks challenging to close the full transaction.”

He was, however, not in favour of divesting government’s stake to another PSU. “This is not the right way to do. Disinvestment should be to the private sector,” he added.

On November 20, the Cabinet Committee on Economic Affairs (CCEA) accorded “in-principle” approval for strategic disinvestment of five state-run companies, including the government’s entire stake [53.29% shareholding] in BPCL, while retaining its ownership in Numaligarh Refinery Ltd (NRL) through some other public sector company.

The four other companies in the strategic disinvestment list are Shipping Corporation of India Ltd (SCI), Container Corporation of India Ltd (CONCOR), Tehri Hydro Development Corporation India Ltd (THDCIL) and North Eastern Electric Power Corporation Ltd (NEEPCO).

In case of difficulties in selling off BPCL’S stake and receiving its proceeds before March 31, the government may take the route that is prescribed for the strategic disinvestment of THDCIL and NEEPCO, the first official said.

CCEA in November decided to divest the government’s entire stakes in THDCIL (74.23% shareholding) and NEEPCO (100%) along with management control to state-run energy major NTPC Ltd.