Disinvestment Comm for CWC split, no sale of Numaligarh refinery

Published on Apr 08, 2004 04:02 PM IST

Disinvestment Comm on Thursday recommended splitting of CWC and disfavoured immediate disinvestment of Numaligarh refinery.

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PTI | ByPress Trust of India, New Delhi

Disinvestment Commission on Thursday recommended splitting Central Warehousing Corporation into several companies as a precursor to its privatisation and disfavoured immediate disinvestment of Numaligarh refinery.

Three companies would be formed to take over the assets of CWC along its major lines of business while another 17 would be set up to take over the stake of CWC in state warehousing corporations, the Commission said in its latest report submitted recently to government.

It also recommended transfer of assets and liabilities of CWC and SWC to newly formed companies subsequent to which the entire government equity in two companies dealing with general and port warehousing could be disinvested to strategic partners.

In the case of the third company, which would deal with foodgrains, the Commission said any decision on privatisation should be taken within three years in line with progress of private sector participation in the sector, growth of private sector warehouses besides establishment of regulatory framework.

The Commission also favoured action to repeal the Warehousing Corporations Act, 1962. Government currently holds over 55 per cent stake in CWC while State Bank of India is a major shareholder with 21 per cent equity.

Set up in 1956 with the mandate of preventing forced sale of produce by farmers at low prices, the Corporation currently runs 473 warehouses with a combined capacity of 92 million MT.

CWC also holds 50 per cent stake in as many as 17 state warehousing corporations across the country.

In the case of Assam-based Numaligarh refinery, the Commission was of the opinion that disinvestment should not be taken up for now, though the Assam Accord under which it was established did not bar such a move.

It, however, felt the privatisation issue should be revisited after a period of five years based on an assessment of performance of the company, role being played by it in meeting social obligations as well as cost involved.

It observed that despite the operations of the company being unviable in the absence of government support, given the history and sensitive nature of investment in backward region, NRL should not be closed.

"It should be run as profitably as possible under the environmental conditions which are not very helpful", the report said.

The Commission also noted that NRL was unlikely to attract private sector interest, especially if the social obligations were imposed on private sector buyers prior to strategic sale.

It, however, asked the government to examine whether NRL can be made a subsidary of Oil India or Indian Oil Corporation after factoring advantages and disadvantages.

NRL was set up in 1993 as a PSU with major contribution from IBP. Subsequently Bharat Petroleum was inducted as a third promoter with 32 per cent stake.

Currently, alongside BPCL, Assam government holds 12 per cent stake besides Oil India Ltd and Oil Industry Development Board which also hold equal stakes in the 3 million MT grassroot refinery which draws crude oil from OIL and ONGC.

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