The Union Cabinet on Wednesday (November 20) approved the sale of the government’s stake in Bharat Petroleum Corporation Ltd (BPCL), Shipping Corporation of India (SCI) and on-land cargo mover Container Corporation of India (Concor).
This is considered the biggest move made by the Cabinet for privatisation of firms held by the government.
The Union Cabinet also decided to reduce shareholding in select public sector firms below 51% to boost revenue collections that have been hit by the economy slowdown.
The Cabinet Committee on Economic Affairs (CCEA) approved the sale of the government’s entire 53.29% stake along with transfer of management control in the country’s second-biggest state-owned refiner BPCL after taking out Numaligarh refinery from its fold, Finance Minister Nirmala Sitharaman told reporters here.
It also approved the sale of an entire 63.75% government holding in SCI and a 30.8% stake in Concor. The government currently holds 54.80% in Concor and will retain 24% stake post sell-off but without any veto powers or management say, Disinvestment Secretary Tuhin Kanta Pandey said.
Besides, the government will sell its entire holding in THDC India and North Eastern Electric Power Corp Ltd (NEEPCO) to state power generator NTPC Ltd, the Finance Minister said. The government holds 74.23% in THDCIL and 100% in NEEPCO.
Sitaraman, however, evaded a direct reply to the time frame for the disinvestments and if the stake sale will happen during the current fiscal year ending March 31, 2020.
Pandey said that the due process will be followed in privatisation and time frame will depend on market interest.
Parallelly, the Cabinet has also approved reducing the government stake in select PSUs such as Indian Oil Corp (IOC) to below 51% while continuing to retain management control. The management control will continue to be retained with the government after considering equity held by other state-owned companies in the divested firm.
The government currently holds 51.5% in IOC and another 25.9% through state-owned Life Insurance Corp of India (LIC), and explorers Oil & Natural Gas Corp (ONGC) and Oil India Ltd (OIL), and the government can possibly sell 26.4% for about ₹33,000 crore.
A similar formula can also apply to ONGC and gas utility GAIL India Ltd.
The stake sales are critical for the government to meet its disinvestment target of ₹1.05 lakh crore set for the current fiscal year. The government’s 53.29% stake in BPCL is worth about ₹63,000 crore going by its closing price of ₹544.65 on the Bombay Stock Exchange (BSE).
At current prices, the government’s 30.8% stake in Concor is worth almost ₹10,800 crore, while the stake sale in SCI will fetch just over ₹2,000 crore. Last year, the government had sold its entire stake in Hindustan Petroleum Corp Ltd (HPCL) to state-owned ONGC for ₹36,915 crore.
BPCL will give buyers ready access to 14% of India’s oil refining capacity and about one-fourth of the fuel marketing infrastructure in the world’s fastest-growing energy market.
The firm operates four refineries in Mumbai, Kochi in Kerala, Bina in Madhya Pradesh and Numaligarh in Assam with a combined capacity of 38.3 million tonnes per annum, which is 15% of India’s total refining capacity of 249.4 million tonnes. After removing 3 million tonnes capacity of the Numaligarh refinery, the new buyer will get 35.3 million tonnes of refining capacity.
It also owns 15,177 petrol pumps and 6,011 LPG distributor agencies in the country. Besides, it has 51 LPG bottling plants. The company distributes 21% of petroleum products consumed in the country by volume as of March this year. BPCL also has more than a fifth of the 250 aviation fuel stations in the country.
The government is keen to get international energy majors such as Saudi Aramco, Total SA of France and ExxonMobil to operate in the downstream fuel marketing business so as to bring in greater competition.
Currently, 95% of retail petrol and diesel sales and near 100% of cooking gas (LPG) and kerosene sales are controlled by the public sector units.
India is the fastest-growing energy market in the world, where the global oil giants are keen to gain a foothold.
As of March 31, 2019, BPCL reported cash and cash equivalents of around ₹5,300 crore, against ₹10,900 crore of debt maturing over the next 15 months.
Sitharaman said that the Numaligarh Refinery will be handed over to the public sector oil company to allay concerns of the North East over privatisation move. BPCL’s equity shareholding of 61.65% in NRL and management control will be transferred to a Central Public Sector Enterprise (CPSE) operating in the oil and gas sector, she said.
“The resources unlocked by the strategic disinvestment of these CPSEs would be used to finance the social sector/developmental programmes of the Government benefiting the public. The unlocked resources would form part of the budget and the usage would come to scrutiny of the public,” an official statement said.
“It is expected that the strategic buyer/acquirer may bring in new management/technology/investment for the growth of these companies and may use innovative methods for their development,” he added.