Uncertainty Over HPCL Investments
New Delhi, January 27: The decision to privatise Hindustan Petroleum Corporation Limited has created uncertainty over investments planned by the company in its own projects and its various joint ventures during 2003-04.
However, it was the unprecedented decision of BPCL privatisation, by way of public sale of government equity, that has raised a number of questions, the most important pertaining to the ownership of BPCL after privatisation.
The government will retain 26 per cent equity in the company. Government bodies, Unit Trust of India and Life Insurance Corporation, hold another 11 per cent of the equity. Besides, government-controlled financial institutions and oil PSUs can pick up a substantial portion of the government equity.
So after the sale of 35 per cent stake in the open market, the government will remain the single-largest owner of BPCL shares, maybe even the majority stake owner. Which means that government will enjoy the control over the company but will be out of the purview of all sorts of controls such as those of Parliament, the Central Vigilance Commissioner and the Comptroller & Auditor General.
A former bureaucrat, who has experience in disinvestment, termed the public sale of BPCL equity as creation of a fiefdom in which the petroleum ministry would enjoy all powers without any accountability. A Rs 26,000-crore company, set up with public money, will go into the hands of a few politicians and bureaucrats.
R Venkatesan, head of the industry division of the National Council of Applied Economic Research, also expressed his reservations regarding the public sale of BPCL equity. Strategic sale is the best way of disinvestment. The private or strategic partner brings in business skills and management expertise, so essential for giving direction to a firm.
Besides, if the government goes for a strategic sale, it is in position to check the excesses of management, he said, adding that there have been instances in developed countries where managements gave themselves huge salaries and perks.
Then there is the issue of creeping acquisition, where an investor can gain considerable say in the company without paying the premium that he would have paid had he taken over the company in a strategic sale, Mr Venkatesan said.
Ironically, disinvestment minister Arun Shourie himself is in favour of the strategic sale route. On a number of occasions, he has favoured strategic sales, but he had to agree to the public sale of BPCL equity because of political pressures.
Mr Shourie also agreed to the building of Bhatinda refinery of HPCL and Bina refinery of BPCL. Yet, he said that HPCL bidders will not be burdened with the Bhatinda refinery. The issue will be addressed at the bidding stage.
BPCL divestment, if it is carried out, will be the first privatisation by way of public sale. In the past, the government did offload its equity in the market, but it was always the minority stake sale. It will be the first time that the government sells its shares in the market and the PSU moves out of the government hands.