Govt defers decision on IPCL

NEW DELHI, AUG 21: The inter-ministerial group on disinvestment of the Rs 3,700 crore Indian Petrochemicals Corporation Limited IPCL ha...

NEW DELHI, AUG 21: The inter-ministerial group on disinvestment of the Rs 3,700 crore Indian Petrochemicals Corporation Limited IPCL has decided to put off the decision on whether or not the state-owned Indian Oil Corporation IOC should be allowed to bid for control of IPCL. A final view is to be taken next week.

The group which met on Friday, comprised the finance ministry8217;s chief economic advisor Shankar Acharya, Petrochemicals secretary Dipak Chatterjee, additional secretary in the petroleum ministry Naresh Narad and IPCL8217;s chief K G Ramanathan.

It is understood that the department of petrochemicals is of the view that IOC should not be allowed to bid for IPCL since it is itself a PSU 8211; according to this view, IPCL is being disinvested and surely that cannot be done if another public sector company buys the shares. The ministry of petroleum, which is supporting IOC8217;s candidature, is of the view that there8217;s nothing wrong 8211; if the oil PSUs could be asked to buy each other8217;s shares before the budgetand give the government Rs 6,500 crore in the process, there8217;s nothing that can stop IOC from buying a controlling stake in IPCL. The finance ministry is believed to be relatively undecided in the matter.

Last year, the Disinvestment Commission had proposed that the government lower its stake in IPCL to 26 per cent, and hand over management of the company to a strategic partner. The Cabinet approved the proposal two months ago, and roadshows for IPCL were held internationally. The Cabinet, however, dropped the Commission8217;s recommendation that care be taken while disinvesting to ensure that no monopoly was created while handing over IPCL to a strategic investor 8211; if this recommendation had been accepted, this would have automatically precluded Reliance Industries from bidding for IPCL8217;s control. While the international response is believed to have been tepid, the big Indian contender for taking over IPCL is Reliance Industries.

IPCL is a big consumer of petroleum products such as naphtha and kerosene -last year, it bought 3 lakh tonnes of naphtha from IOC. Both Reliance and IOC are keen to get control of IPCL for this purpose. In addition, with the plastics market in India set to grow exponentially, IPCL8217;s future looks bright 8211; for Reliance, which is the country8217;s largest producer of various plastics, the synergy with IPCL is also tremendous. Meanwhile, the country8217;s two national exploration companies 8211; the Oil amp; Natural Gas Corporation ONGC and Oil India Ltd OIL 8211; have agreed to swap equity in exploration blocks that they are expected to get under the NELP. Thus, OIL will join hands with ONGC, GAIL and IOC to explore new blocks in the country.