Financial Daily from THE HINDU group of publications
Wednesday, Jan 08, 2003
Industry & Economy
Bickering Ministries hold up HPCL divestment
NEW DELHI, Jan. 7
THE Ministries of Petroleum & Natural Gas and Disinvestment have again crossed swords over the proposed privatisation of oil marketing company Hindustan Petroleum Corporation Ltd (HPCL), giving ample indications that the opinion of the Attorney-General may not settle the controversy.
The latest spat between the two warring Ministries is over the extent of stake to be sold to a strategic partner in HPCL.
The Disinvestment Ministry has proposed a strategic sale of 34 per cent equity in HPCL, which will reduce the Government's holding to about 15 per cent from the existing level of 51 per cent. Besides, it had suggested selling 2 per cent of the stake to the employees of HPCL as stock options.
But, the Petroleum Ministry has favoured a structure which involves a 20 per cent strategic sale and a 5 per cent stock option to employees.
"In this way, the Government would be able to hold a minimum stake of 26 per cent in HPCL, enabling it to have veto powers over decisions concerning the consumers," a Petroleum Ministry official said. This would not be possible with a residual holding of 15 per cent, he added.
The Petroleum Ministry has also suggested that the successful strategic buyer should be bound to complete the 9-million-tonne Bhatinda refinery by building suitable clauses in the shareholders' agreement for the sale.
The Petroleum Ministry has further sought the approval of the Cabinet Committee on Disinvestment (CCD) to allow ONGC to bid for HPCL when it is put up for sale. This move is aimed at enabling ONGC to attain vertical integration through acquisition of HPCL, the official said. Besides, ONGC's participation would make the bidding process competitive and aggressive.
However, the Disinvestment Ministry has opposed this move in line with its stated policy that a PSU bidding for another PSU cannot be termed as privatisation.
As an alternative, the Disinvestment Ministry has suggested a merger between ONGC and IOC to help ONGC realise its retail ambitions. "The Petroleum Ministry can revive the earlier proposal of merging IOC with ONGC to achieve this objective," a Disinvestment Ministry official said.
The Disinvestment Ministry has sought the Attorney-General's opinion on the legal aspects of privatising a company which was nationalised through an Act of Parliament.
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