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Raghuvir Srinivasan

Chennai , Sept. 16

HINDUSTAN Petroleum Corporation Ltd. (HPCL) is destined to be a Government company for at least the next two years, if not more.

That much is certain following the decision of the Supreme Court directing the Government to secure Parliament's approval before proceeding with the privatisation of HPCL and sister company, Bharat Petroleum (BPCL).

If it wants to proceed with the privatisation now, the Government will have to move legislation in Parliament, which, going by present arithmetic, may not get the required support. The Congress (I) said today that it would not support such a proposal in Parliament and without its support, the Government will not be able to get such a proposal through the Upper House.

This effectively means that the present Government will not be able to see the privatisation of the two companies through in the remaining year of its tenure. And it may well become the responsibility of the new, incoming government in 2004.

It would be meaningless to speculate any further than that as a lot would depend on who forms the next government and what the arithmetic in Parliament is then.

Suffice it to say that even assuming that it is a reformist government with Parliamentary majority, it will be a minimum of one year before anything moves on the privatisation front. Thus HPCL looks set to remain in Government control in the near future.

Now, is the judgment a blow to the larger privatisation programme? Yes and no. Yes, in so far as the HPCL and BPCL privatisations were supposed to be show-pieces for this year and expected to rake in enough and more to meet the targeted Rs 13,200 crore from privatisation this fiscal.

The judgment is not a blow to the privatisation programme in the larger context as the apex court has not questioned the privatisation programme but only the procedures followed by the Government. The Supreme Court has clearly stated that the judgment does not have any bearing on the disinvestment process itself but is limited to the context of the mode of disinvestment of the two oil companies.

The abortion of the HPCL privatisation now means yet another frustrated step for multinational Royal Dutch/Shell which was expected to bid aggressively for the company. Shell has been keen on an entry into the lucrative retail market and HPCL represented its best vehicle to do so. It could also mean a re-working of the retail roll out plans of Reliance Industries, which was also banking on a successful attempt at HPCL. Reliance may now have to either intensify its efforts at setting up a retail network of its own or extend the marketing agreement with the oil companies when it expires in 2004.

On a different plane, questions could be raised on the Disinvestment Ministry's decision to open due-diligence for HPCL without waiting for the Supreme Court's decision on the case. Reliance Industries has already completed due-diligence while BPAmoco was half way through the process. Considering that Reliance and HPCL are competitors, the question of whether a disservice has been done to HPCL by opening up its books to Reliance needs to be answered by Mr Arun Shourie, Minister for Disinvestment.

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