The Hindu Business Line : Mittal-HPCL deal: Cabinet may decide today

At a glance
Oil Ministry has granted project-specific approval to Mittal Investments.
FIPB is also understood to have cleared Mittal Investments' proposal.

New Delhi June 20 Steel baron Mr L.N. Mittal's plan to enter into India's petroleum refinery sector seems to have moved forward. The Cabinet is scheduled to meet here on Thursday where a proposal to allow the Mittal group to pick 49 per cent stake in Hindustan Petroleum Corporation Ltd's Guru Gobind Singh Refineries Ltd (GSSRL) at Bhatinda could also be considered.

Speaking to newspersons at the sidelines of a Oil Industry Development Board (OIDB) function here today, the Petroleum Minister, Mr Murli Deora, said ``It will be decided in the Cabinet."

The proposal gains significance in the backdrop that as per current norms, 100 per cent foreign direct investment (FDI) is permitted under the automatic route for private refining companies, but for public sector units, only up to 26 per cent is permitted. Consequently, Mittal's proposal required a Foreign Investment Promotion Board's (FIPB) approval, but the Government decided to consider a review of the policy.

The decision on the revision of the cap rests with the Cabinet. The Petroleum Ministry has granted project-specific approval to Mittal Investments Sarl, the holding company of L.N. Mittal, to pick up stake in Bhatinda refinery. The FIPB is also understood to have cleared Mittal Investments' proposal.

However, indications are that FIPB has given its nod subject to the revision of the overall FDI cap in petroleum refining in the public sector. As per the proposal, Mittal Investments will acquire 49 per cent stake in the refinery for about Rs 3,506 crore through its 100 per cent arm, Mittal Energy Investments Pte Ltd, incorporated in Singapore. HPCL will also hold 49 per cent stake in close to Rs 18,000-crore project, while the balance two per cent would be allocated to financial institutions.

HPCL had signed an agreement with Mittal Investments for the nine-million-tonne refinery in Punjab. According to sources, while considering the proposal, the Cabinet could either remove the overall cap or reject the removal of the cap and grant exemption to the Mittal proposal as a special case.

The Industry Ministry has been looking at revising the policy for FDI in various sectors, with the aim of harmonising caps across sectors.

Apart from the issue of induction of a partner, HPCL required the CCEA nod for relaxation in the Department of Public Enterprises norms. Currently, there is a ceiling, working out to 15 per cent of the PSU's net worth in one project, limited to Rs 1,000 crore, in financial joint ventures and wholly owned subsidiaries. There is also an overall ceiling of 30 per cent of the net worth on such investment in all projects put together. HPCL's investment of Rs 3,506 crore breaches both the overall ceiling of 30 per cent and the limit of Rs 1,000 crore in one project.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Bay `low' becomes marked, prowls outer seas

Call rates touch new low of 0.2%

Allow MFs in commodity futures: NCDEX

`MF industry should look at other growth options'

Mittal-HPCL deal: Cabinet may decide today

Centre may divest 10% stake in Oil India later this year

Tata Motors raising $450 m in global markets

Centre's move to supply CFLs at lower prices

Danone sees early end to dispute with Wadias

Staff leaving talk hurts JM Fin

DoT's move for utilising USO fund finds few takers

Supply situation tight for DAP this year