Financial Daily from THE HINDU group of publications
Friday, Feb 22, 2002
Industry & Economy
CCD to settle `monopoly' controversy in next meet
NEW DELHI, Feb. 21
THE controversy over the creation of monopolies by leading market players in sectors such as oil and petrochemicals during disinvestment in PSUs in these areas is likely to be settled by the Cabinet Committee on Disinvestment (CCD) at its next meeting slated for February 27.
Though the CCD at its meeting held on February 5 had taken a decision to ban Indian Oil Corporation Ltd (IOC) from bidding for HPCL and BPCL citing monopoly reasons when these companies were lined up for sale later this year, IOC had subsequently voiced its objection to this step.
In fact, the IOC Chairman, Mr M.A. Pathan, has written to the Ministry of Disinvestment wherein he had submitted that the Government should either lift the ban on IOC and allow it to bid for HPCL and BPCL or ban Reliance Industries Ltd (RIL) from bidding for Indian Petrochemicals Corporation Ltd (IPCL).
The Disinvestment Ministry says that Mr Pathan's stand does not fit in with his earlier view on the issue. ".... IOC was never interested in acquiring a controlling stake in HPCL and BPCL '', Mr Pathan was quoted as saying on February 5 after the CCD had cleared IOC's bid for acquiring IBP Company Ltd along with a decision to ban the company from bidding for HPCL and BPCL.
"The same Mr Pathan has now contradicted his statement. What can you say about a chief executive of a navaratna PSU who doesn't know about Government policies and their relevance? It is unfortunate'', the Disinvestment Ministry officials said.
The monopoly issue cited by the Government while banning IOC from bidding for HPCL and BPCL holds good for RIL also if it were to acquire IPCL, Mr Pathan is understood to have said in his communication.
Mr Pathan's views have been endorsed by the Petroleum Minister, Mr Ram Naik, who has gone on record stating that CCD would discuss afresh the issue of whether to allow IOC to bid for HPCL and BPCL.
However, for the Disinvestment Ministry, there is no confusion over the monoply issue. In the manufacturing sector there were no monopolies, but in the services sector there were monopolies, the officials said.
In the manufacturing sector, most of the products are on open general licence (OGL). Besides, the creation of monopolies in the manufacturing sector could be nullified by playing around with the duty structure, they pointed out.
Says Mr Arun Shourie, Union Minister of Disinvestment: "Products can be imported to counter dominance by leading players. But services cannot be imported to counter dominance''.
This was one of the reasons why the Government decided not to allow private domestic airlines to bid for Indian Airlines (being in the services sector), when it was put up for strategic sale last year, Mr Shourie said.
Similarly, the case of Binani Zinc, which had bid for Hindustan Zinc Ltd (HZL), went right up to the CCD. Binani Zinc would have become a player with 100 per cent market share if it had acquired HZL.
"However, the CCD decided to allow Binani to bid since it was a company in the manufacturing sector where the products could be imported '', Ministry officials noted.
Earlier also, the case of RIL in the context of IPCL divestment was taken to the CCD which allowed Reliance to take part in the bidding process.
Still, the Ministry is in no mood to leave the issue raised by Mr Pathan and Mr Naik hanging. "We will settle the controversy once and for all in the next meeting of the CCD '', officials said.
Defending the Government's move to ban IOC from bidding for HPCL and BPCL, Mr Shourie had told the media on February 5 after the CCD meeting: "In the oil sector, competition is what the Government was trying to ensure and this can come about when there is public and private sector competition''.
"So, if the entire sector were to remain a monopoly of public companies, there will be no competition and consumers will not benefit'', he had opined.
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