Indian Oil Corp (IOC), the country’s biggest oil firm, will decide on bidding to buy Bharat Petroleum Corporation Ltd (BPCL) after the government lists out rules for the stake sale, its Chairman Sanjiv Singh said Thursday. The Cabinet Committee on Economic Affairs had on November 21, 2019 decided to sell government’s entire 53.29 per cent stake in country’s second-largest state refiner BPCL, but a tender for sale hasn’t yet been issued.
“The expression of interest (EoI) (for BPCL stake sale) hasn’t been issued yet. We don’t know the conditions. We have no information whether PSUs are allowed to bid or not,” Singh told reporters here. “I cannot comment if IOC will bid or not unless we see the conditions set out in the EoI.” He said a decision on the issue can only be taken once there is clarity on the bidding process the government intends to follow.
Soon after the Cabinet decision, Oil Minister Dharmendra Pradhan had hinted that PSUs will be kept out of BPCL privatisation. “Since 2014, we have a clear vision that the government has no business to be in business,” Pradhan had said on November 22, 2019. “We have examples of 2-3 sectors such as telecom and aviation where ushering in private participation has led to customers benefiting from price cuts, efficiency, and better service.” Asked if the company has been told that PSUs will be kept out, Singh said there is no information on whether state-owned firms can bid or not.
BPCL will give the buyer ready access to 14 per cent of India’s oil refining capacity and about one-fourth of the fuel marketing infrastructure in the world’s fastest-growing energy market. It, however, will be sold after carving out Numaligarh Refinery from its portfolio and given to a pubic sector unit. Numaligarh Refinery Ltd is also to be sold out to a PSU, possibly through a bidding process.
Singh said he cannot comment if the company will bid for the Numaligarh Refinery unless tender conditions are revealed. “We don’t know if Numaligarh Refinery will be sold with marketing infrastructure or without its marketing infrastructure. We have to wait for details before IOC can take any decision,” he said.
Numaligarh refinery was set up as per the Assam Peace Accord and the government has decided to keep it in the public sector. At the current trading price of BPCL, the government’s 53.29 per cent stake is valued at around Rs 53,400 crore. On top of this, the acquirer will have to make an open offer to buy an additional 26 per cent stake from minority shareholders for about Rs 26,000 crore.
The price of BPCL has been hammered since the November 21 CCEA decision. On that day, the government stood to gain Rs 62,000 crore from privatisation but will now get about Rs 8,000 crore less. The stake sales are critical for the government to meet its disinvestment target of Rs 1.05 lakh crore set for the current financial year.
The government had allowed PSUs to bid when it sold petro retailer IBP Co Ltd in 2002. IOC had bagged the government’s 33 per cent stake in IBP for Rs 1,153.68 crore or Rs 1,551 a share. The other bidders for IBP were Reliance Industries, Royal Dutch Shell, Kuwait Petroleum Corporation, BPCL, and Hindustan Petroleum Corporation. The reserve price for IBP was Rs 337 crore.
Last year, the government sold its entire stake in Hindustan Petroleum Corp Ltd (HPCL) to state-owned Oil and Natural Gas Corp (ONGC) for Rs 36,915 crore. BPCL operates four refineries in Mumbai, Kochi (Kerala), Bina (Madhya Pradesh) and Numaligarh (Assam) with a combined capacity of 38.3 million tonnes per annum, which is 15 per cent of India’s total refining capacity of 249.4 million tonnes.
After removing 3 million tonnes capacity of 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 (liquefied petroleum gas) bottling plants. The company distributes 21 per cent of petroleum products consumed in the country by volume as of March this year and 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 per cent of retail petrol and diesel sales and near 100 per cent of cooking gas (LPG) and kerosene sales are controlled by the public sector units. As on March 31, BPCL reported cash and cash equivalents of around Rs 5,300 crore against Rs 10,900 crore of debt maturing over the next 15 months.