Search the Internet          Tips  Sites: Finance, Investment

Naik says he is not against divestment in oil PSUs

Petroleum Minister Ram Naik said on Tuesday that he was not against divestment of government equity in oil PSUs but felt strategic sale was not the most appropriate way.

"We (ministers in the government) are very much for divestment, but the desirability of strategic route in divestment is being discussed," Naik said in New Delhi.

The Cabinet Committee on Divestment had last month postponed decision on the privatisation of state-run refiners Bharat Petroleum and Hindustan Petroleum following sharp differences among the ministers on the route to be followed.

Naik said the government should get out of oil PSUs, other than where a decision has been taken to keep majority control.

"We feel that shares should go to the people at large instead of being sold to one group," he said when questioned about sale of government equity in BPCL and HPCL through public offer.

Asked if public offer would not deprive the government of control premium it gets through the strategic route, Naik said: "The government is not in the business of making profits or losses. Moreover, the cash investment in BPCL and HPCL has been less than Rs 43 crore (Rs 430 million) way back in 1974 and today the two companies are worth Rs 20,000 crore (Rs 200 billion) each."

The government has not provided any budgetary support to the two PSUs, he said, adding the public offer can fetch good returns considering the high desirability of oil PSUs in the stock markets.

Dismissing suggestions that he has been identified as the leader of "anti-divestment" lobby, Naik pointed out that of the total Rs 9070 crore (Rs 90.70 billion) divestment proceeds garnered by the government since 1998, the oil ministry has contributed Rs 7,217 crore (Rs 72.17 billion).

"When we have contributed nearly 80 per cent of the total divestment proceeds of the government, how can we be anti-divestment," he asked.

Naik proposed minority stake sale in Oil and Natural Gas Corporation, Indian Oil and Gas Authority of India Ltd, where the government has decided to maintain majority control, to meet the Rs 12,000 crore (Rs 120 billion) divestment target set for the current fiscal.

PSUs under the petroleum ministry, according to Naik, could give the government Rs 7640 crore (Rs 76.4 billion) this fiscal as divestment proceeds.

"While sale of 10 per cent equity each in ONGC and IOC and 5 per cent in GAIL could give the government Rs 6,500 crore (Rs 65 billion) at current prices, strategic sale in Engineers India Ltd and Balmer Lawrie would fetch Rs 1140 crore (Rs 11.4 billion)," he said.

Naik's suggestions assume importance in the wake of Divestment Minister Arun Shourie's remarks that it would be difficult to meet the divestment target for the year in view of the deferment of the decision to privatise HPCL and BPCL.

Naik said his opposition to the outright sale in BPCL and HPCL was also linked to the issue of completion of ongoing refinery expansion project of the two companies, which the strategic partner may not undertake.

HPCL and BPCL have spent almost Rs 500 crore (Rs 5 billion) on their 9-million tonnes Bhatinda and 6-million tonnes Bina refineries.

Privatise companies may not be inclined to complete the Rs 6354 crore (Rs 63.54 billion) Bina and Rs 9806 crore (Rs 98.06 billion) Bhatinda refineries.

ALSO READ:
The Divestment Development
More Money Headlines