PSU disinvestment: Legal hurdles cleared for Bharat Petroleum sale

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Updated: October 2, 2019 6:46:57 AM

According to sources, Sitharaman was part of the internal meetings during the last weekend that helped the panel of secretaries to approve the proposals on Monday.

The processes are being fast-tracked with finance minister Nirmala Sitharaman herself overseeing the exercise to sort out various inter-ministerial issues.

The privatisation of Bharat Petroleum Corporation (BPCL), which could fetch around 55% of the FY20 disinvestment target of Rs 1.05 lakh crore, will be fast-tracked to conclude the transaction by the fourth quarter of this year as the legal hurdles have been removed, sources told FE.

The government has repealed three relevant Acts of Parliament to remove BPCL from their purview in April 2016, almost unnoticed, thereby removing a key stumbling block. Among the 295 obsolete Acts repealed that year, it abolished the Esso (Acquisition of Undertakings in India) Act, 1974, the Caltex Act, 1977 and the Burmah Shell (Acquisition of Undertakings India) Act, 1976 — which were linked to BPCL.

However, Parliament will be informed of the proposed stake sale in BPCL, an official said.

In a 2003 verdict, the Supreme Court had told the government that it could not privatise BPCL and HPCL without amending or repealing these laws, which provided that oil distribution business “be vested with the State”. Under these statutes, the Burmah Shell was taken over by the Centre in 1976 to form Bharat Refineries, which was later renamed BPCL. The Centre has also repealed relavant shipping laws that governed Shipping Corporation.

Besides its 53.29% stake in BPCL, the core group of secretaries on disinvestment on Monday also approved the sale of its 63.75% stake in Shipping Corporation, 30% in ConCor, 100% in NEEPCO and 75% in THDC. The current market value of the government’s stake to be offloaded in these companies is estimated to be about Rs 88,900 crore, which is 85% of the disinvestment revenue target for this fiscal.
The strategic disinvestment of BPCL would be crucial for the Centre to garner a record disinvestment receipt in FY20, up from Rs 85,000 crore in FY19 (helped by PFC purchase of the government’s stake in REC) and Rs 1 lakh crore in FY18 (thanks to ONGC’s purchase of the Centre’s stake in HPCL). So far in the current financial year, it has garnered Rs 12,357 crore or 12% of this fiscal’s target.

With half of the year already over, the approval of the secretaries’ panel is important from the point of view of executing the strategic transactions as it could take up to six months depending on the pace of processes and procedures. The processes are being fast-tracked with finance minister Nirmala Sitharaman herself overseeing the exercise to sort out various inter-ministerial issues.

According to sources, Sitharaman was part of the internal meetings during the last weekend that helped the panel of secretaries to approve the proposals on Monday. Cabinet proposals would be floated soon for stake sale in each of these companies.
The strategic disinvestment process would be through a three-stage process —expression of interest (EoI) to identify serious bidders, request for proposal (RFP) and bids, and completion. Strategic disinvestment takes time to fructify and some of the proposed deals could spill over to next year.

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