Even as the Cabinet has approved the proposal of selling the residual government holding in five companies, the petroleum ministry has expressed its reservations on the sale of 34 per cent government stake in Indian Petrochemicals Corporation Ltd, apprehending that the Ambanis may buy the residual shares and merge the erstwhile public sector company with its parent company.
''The possible merger may affect the consumers interest in view of the fact that the Reliance group now have virtually total control in the petro-chemicals market,'' highly placed sources said in New Delhi on Friday.
According to market analysts, at present, the Ambanis control nearly 80 per cent of the petro-chemical products market.
The fear of merger was expressed in an inter-ministerial Cabinet note, in which the ministry has said that if the Ambanis decide to buy the 34 per cent government holding in IPCL, their equity will rise to more than 80 per cent and it may be possible that they may merge IPCL with their parent company, Reliance Industries Ltd.
The ministry said after the Ambanis took over the company last year, they had introduced a voluntary retirement scheme and also raised the product prices, affecting the buyers. The products of IPCL are used in the manufacturing of textiles, plastics and other important mass consumption products.
During an hour-long Cabinet Committee on Divestment meeting on Thursday, Petroleum Minister Ram Naik also objected to the sale of IPCL shares to Ambanis on the similar ground and told the CCD that it could harm the interests of consumers.
However, there was not much resistance to the initial public offering of other companies as the ministries concerned have welcomed the step.
The petroleum minister welcomed the proposed sale of the government holding in IBP Co and told the CCD that the government could sell its holding to the public at the earliest in view of the bullish market conditions.
While the shareholders' agreements with the existing controlling partners in the five erstwhile public sector companies, in which IPOs are planned, give them the first right of refusal, the government expects them not to opt for such a step since they are already running the managements.
The government has decided to come out with IPOs of its residual stakes in topnotch companies such as CMC, IBP, Videsh Sanchar Nigam Ltd, IPCL and Bharat Aluminium Company Ltd. The CCD also approved the proposals to appoint advisors for the purpose.
As per the decision, the government will sell its 26 per cent holding in IBP, 26.12 per cent in VSNL, 26.25 per cent in CMC, 33.95 per cent in IPCL and 49 per cent in Balco.
According to sources, the CCD took the petroleum ministry's views on IPCL seriously, and the government may impose certain conditions before selling its 34 per cent equity.
''Since the IPCL is dealing with mass consumption products, exit of the government from the company will lead to the monopoly of Reliance group,'' a senior Cabinet minister told UNI after the meeting.
Sources said the government is keen to sell the residual shares in view of the overwhelming response from small investors in Maruti Udyog Limited, in which the government had sold around 24 per cent equity.
Given a strong appetite for the PSU shares in the primary and secondary markets and runaway rise in the capitalisation of these firms, the government would soon start working on these issues, the sources added.
(UNI)
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