department of disinvestment (DoD) sent a note to the ministries which had an interest in the divestment of HPCL and BPCL. The note — which had the approval of the Cabinet Committee on Disinvestment — clearly stated that no PSU should be allowed to bid for the two oil majors.
The DoD's argument: a PSU buying another government company isn't really disinvestment as there is no change in ownership. The only way to get around the bar was for the ministry concerned to seek an exemption by putting forth a note to the cabinet.
This pleased Disinvestment Minister Arun Shourie and the pro-sell-off lobby, which didn't want a repeat of the IBP sale, where the state-owned IOC paid an astronomical amount to snap up the company.
Meanwhile, in the anti-sell-off corner, Defence Minister George Fernandes, Petroleum Minister Ram Naik and the Swadeshi Jagran Manch's S. Gurumurthy opposed the sale of oil companies to Indian bidders, specially Reliance Industries.
They got what they wanted when the Finance Ministry was advised — internally, in mid-September — that all Indian companies should be kept out of the bidding for HPCL, and a foreign major should be allowed to bid.
The rationale was that a foreign entity entering the Indian market would help spur competition. Moreover, the Finance Ministry argued that a foreign oil giant would offer a window to international technology and provide a bridgehead to Central Asia, which is floating on oil.
The Finance Ministry is optimistic that HPCL will find foreign suitors as global heavyweights such as Chevron, Exxon, BP and Royal Dutch Shell have reportedly expressed interest in it. State-owned foreign companies such as Kuwait Petroleum and Petronas are likely to be in the fray.
The two parallel views probably helped the government wriggle out of the deadlock on disinvestment after the CCD's three-month moratorium starting September 7, and come up with a compromise formula on what to do with the oil majors.
The two views were conveyed to Prime Minister Atal Bihari Vajpaye when several senior ministers met at his house on December 5 to discuss disinvestment-related issues. That's where the modalities for selling HPCL to a strategic partner and offloading BPCL stake to the public were worked out.
The formula seems to have worked, for not only has the freeze on divestment been overturned, more importantly, the privatisation momentum has once again received a boost. The only sour note is that in a free market economy it just does not make sense to bar Indian entities from bidding for HPCL.
DoD view: Don’t allow PSUs to bid for HPCL
Reason: This isn’t disinvestment as there is no change in ownership
Who’s happy: Pro-divestment lobby, Arun Shourie
No Indian company will be allowed to bid for public sector oil major HPCL, highly placed sources told the Hindustan Times on Wednesday. This is the fallout of the compromise reached to end the deadlock within the NDA government over the sale of BPCL and HPCL.
Finance Ministry view: Keep all Indian companies out of HPCL bid process
Reason: Letting in foreign cos will spur competition, and introduce new tech
Who’s happy: George Fernandes, Ram Naik and S. Gurumurthy who want Reliance Industries out of the scene