Govt caught in a piquant situation on IBP’s privatisation

Department of Disinvestment had earlier proposed lowering of government equity in IBP from 59.59 per cent to 26 per cent by induction of a strategic partner even as it turned down the offer of Indian Oil Corporation to outrightly buy government equity saying PSUs could participate in the bidding process.

As per earlier Cabinet decision, marketing of petro products would be the domain of national oil companies till the deregularisation of oil sector by the year 2002 and any foreign company could enter the marketing sector only if it invested at least Rs 2,000 crore in production, exploration or refineries sectors.

The private sector major — Reliance Refinery at Jamnagar with a capacity of 27 million tonnes has also not yet been given the marketing rights in the country and it has tied up with Indian Oil Corporation for marketing of 50 per cent of its products and with Hindustan Petroleum and Bharat Petroleum for the other half.

Even though senior officials from both the ministries declined to comment on the issue, sources said that Shourie would seek to evolve a consensus on divestment in oil sector in general and privatisation of IBP in particular on the basis of recommendations of the erstwhile Disinvestment Commission, headed by G V Ramakrishna.

Sources said that not only IOC has written to Petroleum Ministry formally for acquiring stand-alone marketing company IBP, which has over 1500 retail outlets, but IOC chief M A Pathan has also met Shourie with his proposal.

Amidst the firm international oil prices coupled with high duty structure in the country, global majors are eyeing IBP for its marketing network so that they could enter India with cheaper imports.

Although only four oil PSUs– IOC, IBP, HPCL and BPCL –are marketing petro products in the country, major consumers in power and fertiliser sectors are expolring import of deregulated petro products like naptha, fuel oil etc as it would help them save on heavy duties in the country.

Even Reliance had said last year that it would like totake equity in some of the oil PSUs as and when Government decided to part with its holding.

IOC has already pointed to the government that entry of global majors through taking stake in IBP would tentamount to circumventing of earlier policies and some of the players like Shell-Aramco, BP could make exaggerated bids to enter the lucrative Indian market, sources said.

The other contentious issue is the manner of disinvestment in IBP, with DoD favouring that the company should be privatised as it is while Petroleum Minister is believed to have sought a decision on subsidiaries of IBP prior to any divestment in the oil company.