Cash-starved West Bengal plans to raise about R450 crore by offloading its 10% residual stake of 155 million shares in joint venture Haldia Petrochemicals (HPL) back to the company. Though the transaction will give some financial breathing room to chief minister Mamata Banerjee, the majority shareholder Purnendu Chatterjee-led TCG will be left with two options: A significant cash outgo or a possible approach from competitors like Reliance Industries. The sale will also violate a Supreme Court order, which had asked the state government to retain its residual stake.

Industry minister Partha Chatterjee confirmed the plan, adding the government would decide on the stake sale after taking legal opinion. He said the state was not keen to hold on to its HPL stake. Officials from the petrochemicals company said the government was expected to communicate its decision by October 31, but has not done so far.

An industry department source told FE that if shares are sold to TCG now, the price will be R28.80, set by the Company Law Board.

The developments come in the backdrop of R1,000-crore accumulated losses at HPL, which has charted a turnaround road map for the next three years. The company wants the government to hold on to its stake a bit longer as it will earn far more, once it is out of the red.

Among possible suitors for a stake in HPL are Reliance Industries and Indian Oil, neither of them palatable to TCG. However, in response to an FE questionnaire, a Reliance Industries spokesperson said: ?We strongly deny any such development or interest.?

The HPL management hopes the government will not go ahead with a unilateral share sale, as their consent is needed to get around the court order on the ban on selling shares. Company managing director Partha Bhattacharyya told FE that the company was eager to wash its hands off the legal disputes and move ahead. ?We are the only competitor to Reliance (Industries) in India and our products are of better quality. We should work to make a turnaround and increase our market share?.

West Bengal is also expediting transfer of an earlier block of 520 million shares (at R28.80 each) as per the orders of the Company Law Board in 2007. The transfer of shares is in instalments with the entire transaction divided into four tranches.

The Left Front government had completed three tranches but had halted the fourth. However, the industry department has now cleared the last instalment too from which the state would earn R115 crore.

Besides the state government with its 10% stake, the Tatas hold 2.88% in HPL, while IOC holds 9.61%. After the West Bengal government transfers 520 million shares, TCG?s stake will touch 77.56%.