DoD to take three proposals on IPCL selloff to GoM

Ravi Kapoor

New Delhi, Oct 15: The department of disinvestment (DoD) will take three specific proposals to the group of ministers (GoM) for the privatisation of Indian Petrochemicals Corporation Ltd (IPCL). The GoM is expected to meet on November 7 to deliberate on the fate of IPCL.

The GoM, which was set up by the Cabinet committee on disinvestment (CCD) to sort out the IPCL privatisation, comprises disinvestment minister Arun Shourie, petroleum & natural gas minister Ram Naik, minister of chemicals & fertilisers SS Dhindsa and finance minister Yashwant Sinha.

The three proposals DoD is taking to the GoM are: revert to the earlier mode of privatisation and start where it was left; handover IPCL to Indian Oil Corporation (IOC); and start the privatisation process anew.

While DoD favours to revert to the earlier mode of privatisation, the ministry of petroleum & natural gas wants IPCL to go to IOC. DoD will try hard to get the issue resolved at the first GoM meeting, so that its decision could be put before the next CCD meet which is likely to be held shortly after November 7.

IPCL privatisation, like other divestments, has been proceeding at snail’s pace for years. In December 1998, the government accorded in-principle approval to 25 per cent strategic sale of IPCL.

The selloff process started with the issue of advertisements in newspapers, inviting bids from investors all over the world. The initial response was very good, and a number of global majors expressed interest to take over IPCL.

Gradually, however, they started losing interest in the petrochemicals giant, and in the final lap only two bidders were left — Reliance and the IOC-Soros-Chatterjee consortium.

At this juncture, the IOC chairman met Mr Shourie and managed to convince him that the government should go for an alternative route for IPCL privatisation. So, in November 2000, the government came out with an alternative route, which was a two-phase divestment.

As per the new plan, IOC would take over the Vadodara plant of IPCL, with which IOC’s Gujarat Refinery had “synergy of operations.” After that, the government would sell off the two remaining units of IPCL.

The alternative privatisation route never took off, as the managements of IOC and IPCL fought a six-month war over the valuation of IPCL, Vadodara. While IOC found its value not exceeding Rs 300 crore, the IPCL management valued it at more than Rs 1,300 crore.

Fed up with the incessant bickering between the two public sector undertakings (PSUs), Mr Shourie decided to dispense with the alternative route. When the issue came up at the CCD, Mr Naik said that IOC should take over the entire IPCL.

The DoD, obviously, feels that this would make mockery of the privatisation process: one PSU buying another is anything but privatisation. Hence, the CCD decided to constitute a GoM to resolve the issue.