Govt gives go-ahead to biggest privatisation drive; to sell stake in BPCL, SCI, Concor to help bridge a widening fiscal gap

New Delhi: In the biggest privatisation drive-ever, the Union Cabinet on Wednesday approved sale of government’s stake in blue-chip oil firm BPCL, shipping firm SCI and onland cargo mover Concor as well as decided to cut shareholding in select public sector firms below 51 percent to boost revenue collections that have been hit by slowing economy.

#BreakingNews | FM @nsitharaman briefs the media after #Cabinet meeting, says decided to cut Govt stake in CPSEs below 51% while retaining mgmt control on a case-to-case basis#divestment #disinvestment pic.twitter.com/XBIKllsW4E

— CNBC-TV18 (@CNBCTV18Live) November 20, 2019

The Cabinet Committee on Economic Affairs (CCEA) approved the sale of government’s entire 53.29 percent stake along with transfer of management control in the country’s second-biggest state-owned refiner Bharat Petroleum Corp Ltd (BPCL) after taking out Numaligarh refinery from its fold, Finance Minister Nirmala Sitharaman told reporters here.

#BreakingNews | FM @nsitharaman says BPCL’s 61% stake in numaligarh refinery in assam will be moved to another govt entity, will remain a PSU#divestment #disinvestment #cabinet pic.twitter.com/OzSKcm3vYg

— CNBC-TV18 (@CNBCTV18Live) November 20, 2019

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It also approved the sale of an entire 63.75 percent government holding in Shipping Corp of India (SCI) and a 30.8 percent stake in Container Corp of India (Concor). The government currently holds 54.80 percent in Concor and will retain 24 percent stake post sell-off but without any veto powers or management say, Disinvestment Secretary Tuhin Kanta Pandey said. Besides, the government will sell its entire holding in THDC India and North Eastern Electric Power Corp Ltd (NEEPCO) to state power generator NTPC Ltd, the Finance Minister said. The government holds 74.23 per cent in THDCIL and 100 percent NEEPCO. [caption id=“attachment_7340511” align=“alignleft” width=“380”]  File image of Finance Minister Nirmala Sitharaman. PTI[/caption] She, however, evaded a direct reply to the timeframe for the disinvestments and if the stake sale will happen during the current fiscal year ending 31 March 2020. Pandey said the due process will be followed in privatisation and timeframe will depend on market interest. Parallelly, the Cabinet has also approved reducing government stake in select PSUs such as Indian Oil Corp (IOC) to below 51 percent while continuing to retain management control. The management control will continue to be retained with the government after considering equity held by other state-owned companies in the divested firm. The government, currently, holds 51.5 percent in IOC and another 25.9 percent through state-owned Life Insurance Corp of India (LIC), and explorers Oil & Natural Gas Corp (ONGC) and Oil India Ltd (OIL), and the government can potentially sell 26.4 percent for about Rs 33,000 crore. A similar formula can also apply to ONGC and gas utility GAIL India Ltd. The stake sales are critical for the government to meet its disinvestment target of Rs 1.05 lakh crore set for the current fiscal year. The government’s 53.29 percent stake in BPCL is worth about Rs 63,000 crore going by its closing price of Rs 544.65 on the BSE. At current prices, the government’s 30.8 percent stake in Concor is worth about Rs 10,800 crore, while stake sale in SCI will fetch just over Rs 2,000 crore. Last year, the government had sold its entire stake in Hindustan Petroleum Corp Ltd (HPCL) to state-owned Oil and Natural Gas Corp (ONGC) for Rs 36,915 crore. BPCL will give buyers ready access to 14 percent of India’s oil refining capacity and about one-fourth of the fuel marketing infrastructure in the world’s fastest-growing energy market. The firm operates four refineries in Mumbai, Kochi in Kerala, Bina in Madhya Pradesh and Numaligarh in Assam with a combined capacity of 38.3 million tonnes per annum, which is 15 percent of India’s total refining capacity of 249.4 million tonnes. After removing 3 million tonnes capacity of the Numaligarh refinery, the new buyer will get 35.3 million tonnes of refining capacity. It also owns 15,177 petrol pumps and 6,011 LPG distributor agencies in the country. Besides, it has 51 LPG bottling plants. The company distributes 21 percent of petroleum products consumed in the country by volume as of March this year. BPCL also has more than a fifth of the 250 aviation fuel stations in the country. The government is keen to get international energy majors such as Saudi Aramco, Total SA of France and ExxonMobil to operate in the downstream fuel marketing business so as to bring in greater competition. Currently, 95 percent of retail petrol and diesel sales and near 100 percent of cooking gas (LPG) and kerosene sales are controlled by the public sector units. India is the fastest-growing energy market in the world, where the global oil giants are keen to gain a foothold. As of 31 March 2019, BPCL reported cash and cash equivalents of around Rs 5,300 crore, against Rs 10,900 crore of debt maturing over the next 15 months. Sitharaman said Numaligarh Refinery will be handed over to the public sector oil company to allay concerns of the North East over privatisation move. BPCL’s equity shareholding of 61.65 percent in Numaligarh Refinery Ltd (NRL) and management control will be transferred to a Central Public Sector Enterprise (CPSE) operating in the oil and gas sector, she said. “The resources unlocked by the strategic disinvestment of these CPSEs would be used to finance the social sector/developmental programmes of the Government benefiting the public. The unlocked resources would form part of the budget and the usage would come to the scrutiny of the public,” an official statement said. “It is expected that the strategic buyer/ acquirer may bring in new management/technology/investment for the growth of these companies and may use innovative methods for their development,” he added.