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Wednesday, Feb 06, 2002

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Tatas pocket VSNL for Rs 1,439 cr, IOC gets IBP

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INDIAN Oil Corporation Ltd and Tata Sons Ltd have won strategic control of IBP Co Ltd and Videsh Sanchar Nigam Ltd (VSNL) respectively in a major disinvestment event, fetching the Union Government a neat Rs 2,592.93 crore and signifying a landmark in the Government's sell-off programme.

IOC's highest bid of Rs.1,153.68 crore at Rs 1,551.25 per share for acquiring 33.58 per cent of the Government's equity in IBP and Panataone Finvest (a Tata Group Co) bid price of Rs 1,439.25 crore at Rs 202 per share for buying 25 per cent of the Government stake in VSNL were approved by the Cabinet Committee on Disinvestment (CCD) at a meeting here today.

The Government had fixed a reserve price of Rs 1,218.375 crore for its 25 per cent stake in VSNL and Rs 337 crore for selling 33.58 per cent equity in IBP.

The CCD also decided not to allow IOC or any other PSUs to bid for Government stake in Hindustan Petroleum Corporation Ltd (HPCL) and Bharat Petroleum Corporation Ltd (BPCL) when these oil companies are put up for strategic sale by the Government later this year.

"This (banning of IOC) is being done to ensure that there is competiton in the oil sector with the existence of public and private companies so that the consumers will benefit'', Mr Arun Shourie, Union Minister of Disinvestment, said after the CCD meeting.

Within three months of the dismantling of the administered price mechanism (APM) for the petroleum sector, the Ministry of Disinvestment will approach the CCD seeking its nod to go in for strategic sale of HPCL and BPCL.

Defending the Government's decision not to permit IOC or other PSUs to bid for HPCL and BPCL when they are lined up for strategic sale, Mr Shourie said that if the entire oil sector remained a monopoly of the public companies, there would be no competition and consumers would not benefit.

"In the oil sector, competition is what we are trying to ensure and that can come about only when there is competition between public and private sector companies'', Mr Shourie said.

By acquiring IBP, IOC will have control over 1,500 retail petrol stations owned by the former which would immediately make IOC a competitive player when other private companies come in the post-APM scenario.

There was excess refining capacity with IOC, but it lacked enough retail outlets to market the petro products.

"IOC needed access to more retail outlets immediately and bid aggressively for IBP Co Ltd with the aim of preparing itself for a competitive scenario with the dismantling of APM from April 1 this year'', he stated.

In the process, IOC outbid multinational giants such as Royal Dutch Shell Group, Kuwait Petroleum Corporation Ltd and domestic major Reliance Industries Ltd, HPCL and BPCL. The other bids for IBP were in the range of Rs 460 crore to Rs 595 crore, Mr Shourie said.

The realisation from the sale of VSNL would go up to Rs 3,689.25 crore after factoring in Rs 1,887 crore as dividend and Rs 363 crore as dividend tax.

"Thus, the Government has sold its shares for Rs 1,439.25 crore, taken additional amount as dividend, special dividend and dividend tax. Besides, the Government has also taken measures to take out surplus, yet very valuable land valued at Rs 778 crore, and also restricted the use/sale of land through provisions in the transaction documents'', Mr Shourie said.

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