Postpone BPCL, Air India stake sales

A cash-strapped Centre seems desperate to quickly push through two key stake sales — that of BPCL and Air India. Understandably so. There is a huge shortfall in tax revenue and the fiscal deficit is likely to shoot up this year due to the Covid crisis. Disinvestment proceeds budgeted at an aggressive ₹2.1 lakh crore for FY 2021 can possibly help fill part of the big breach. The planned stake sales of BPCL and Air India are expected to play a key role here.

But it seems a bad idea to press ahead with these divestments at this juncture. That’s primarily because the values realised for the family silver now will likely be sub-optimal. Both the airline and oil & gas sectors have been badly hit by the pandemic crisis with players struggling to survive and stock prices crashing.

Given the widespread stress, many potential buyers may not be in a position to bid. And the handful who do could under-cut badly, sensing signs of distress sales.

This could be especially true in the case of BPCL that is otherwise a strong company with about 15 per cent of the refining capacity and about a quarter of the fuel retail outlets in India. But the pain in the sector has contributed to the BPCL stock price falling from about ₹530 last October to ₹415 now.

So, the Centre’s stake could fetch it much less than a year back. It may be better to wait for the cycle to turn and get the best value for a good franchise with growth potential.

Even in the case of the loss-making and debt-laden Air India, it may be better to postpone an inevitable sale until the situation in the aviation sector improves and better value can be realized.

The Centre has been repeatedly extending the deadlines to submit bids; it is now September 30 for BPCL and October 30 for Air India. Putting off the stake sales until the weather clears may be prudent.

Borrowing more temporarily to tide over a financial crisis may be better, than underselling assets permanently.