The Hindu Business Line : Govt mulls raising FDI cap in PSU refineries

New Delhi, Aug. 1 The Government is examining the option of raising the foreign direct investment (FDI) cap in public sector refineries from the existing 26 per cent. Sources said this may come as part of the FDI review process currently being undertaken, which is likely to be finalised around September.

The move to take a policy view on easing the FDI limit for PSU refineries comes in the wake of the recent Government decision to allow steel baron Mr L.N. Mittal’s group to pick up 49 per cent stake in Hindustan Petroleum Corporation Ltd’s Bhatinda refinery. Under the current norms, 100 per FDI is permitted through automatic route for private refining companies, but for the public sector companies only up to 26 per cent is allowed. Thus, Mittal’s proposal had required a Foreign Investment Promotion Board’s (FIPB) approval.

The Petroleum Ministry had favoured a relaxation in the FDI cap for all PSUs. However, in the absence of any policy, the Government had cleared the Mittal proposal as a standalone case. Sources said 49 per cent is the highest slab beyond which the private partner anyway would have a majority stake.

Policy revision

While giving its nod to the Mittal proposal, the FIPB had taken the view that the same was subject to the revision of the overall FDI cap in petroleum refining in the public sector. As per the proposal, Mittal Investments would have acquired 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 would also hold 49 per cent stake in close to Rs 18,919-crore project, while the balance two per cent would be allocated to financial institutions.

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

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