Govt steps on gas, oil PSUs sale okayed

Breaking a four month-old political logjam, the government has reached a decision to disinvest public sector oil companies Hindustan Petroleum Corporation and Bharat Petroleum Corporation.
HPCL will be sold to a strategic investor while BPCL will be divested through a public issue. Oil and Natural Gas Corporation, public sector upstream oil company that had been keen to buy HPCL, has not been permitted to bid.
The very fact that a meeting of the Cabinet committee on disinvestment had been fixed on Republic Day suggested that the political leadership was determined to take a definitive decision on the vexed question of privatising oil PSUs.
It sends out a clear signal that the ruling coalition has the ability to resolve differences among its members and reach operational decisions to press ahead with key economic reform.
The government has decided to sell 34.01% equity in HPCL to a strategic investor. Another 5% will be given to the company’s employees. This will leave the government with 12% equity after divestment, reducing it to a portfolio investor without the power to block a special resolution, which calls for a 26% stake.
The government will sell off a 35.2% stake in Bharat Petroleum through a public issues in the domestic and international markets. Again, a 5% chunk will go to the company’s employees. This will leave the government with a 26% stake in the company.
The decision to sell the divested stake to a strategic investor in the case of HPCL and to a diffuse mass of investors through a public issue in the case of BPCL is the result of a compromise between pro and anti-disinvestment lobbies within the ruling dispensation.
Sale of government stake to the public is seen by its proponents as a way of taking the company out of stifling government control and at the same time, preventing too much concentration of oil refinery control in the hands of a strategic player in the sector.