Govt ditches disinvestment, for now

NEW DELHI: In a major setback to the disinvestment programme of public sector companies, the government has deferred all decisions on privatisation of HPCL and BPCL for the next three months. Simultaneously, it has also decided to defer disinvestment through public offerings of 10-25 per cent in IOC, ONGC, Gail, BSNL and NTPC for three months.
The Cabinet Committee on Disinvestment (CCD), which met this evening, put aside all decisions of divestment in oil PSUs, either through strategic sale or through dilution of cross holdings till December 2002. In other words, IOC’s plans to dilute its holding in ONGC and GAIL too have been put on hold for the time being.
It is not clear whether the in-principle decision given by the CCD in February to privatise HPCL and BPCL stands in view of today’s decision. Sections of the government felt that deferment could be interpreted as suspending the earlier decision to privatise HPCL and BPCL.
Prime Minister Atal Behari Vajpayee held a meeting with senior cabinet colleagues this morning to work out a consensus on oil sector disinvestment.
The meeting was attended by deputy prime minister L K Advani, defence minister George Fernandes, finance minister Jaswant Singh, petroleum minister Ram Naik and disinvestment minister Arun Shourie, among others.
Sources said informal discussions and meetings would be held at various levels within the next three months to get the whole process of disinvestment “going�. The government will have to take a call on whether to adopt the strategic sale or the public offering route while diluting equity.
It is learnt that the petroleum ministry raised crucial issues like the future of the upcoming refineries and fund requirements. Also, whether investors coming into the sector would be interested in completing these projects.
Briefing newspersons after the CCD meeting, Shourie said that the decision to defer disinvestment in these companies was taken at the highest level and it will affect the government’s estimated revenue targets from disinvestment.
As far as the public offerings of some of these companies are concerned, the CCD has left it to the administrative ministry to now take it up independently. There were plans that some of these companies would be able to combine the IPO with the government’s disinvestment plans to mop up resources for their projects.
Asked whether this decision would affect investor perception, Mr Shourie said: “The markets and rating agencies will reflect investor perception.� This decision by the government, which to a large extent is because of heavy internal lobbying by the NDA and BJP factions, will affect investor interest in the oil sector. This sector, which has recently been decontrolled, has always been a target for big ticket disinvestment.
A major success story for the disinvestment ministry so far has been the disinvestment of IBP to Indian Oil Corporation.