Govt rushes through Sengupta recommendations

Under the proposal, the stand-alone refineries, Madras Refineries and Bongaigaon Refineries are to be sold to Indian Oil while Cochin Refineries and IBP an independent petroleum marketing company with a 5-pc share on an all-India basis are to be sold off to Bharat Petroleum. Sengupta8217;s rationale was that these smaller independent refineries and IBP would not be able to survive after the oil sector was completely opened up in 2002, and so should be merged with the larger players like Indian Oil and Bharat Petroleum.

Interestingly, however, while the ministry is pushing through the proposal, the Nitish Sengupta report was completely rejected by themajor oil companies, none of which were even represented on the committee, when it was first presented in March.

The report was then modified somewhat by the Ministry of Petroleum but was still opposed by several oil companies. The report has still not been ratified by the Cabinet, the usual procedure for such important reports.When the report was first discussed, Hindustan Petroleum, for example, had pointed out that they were not getting any additional refining or marketing capacity while this was being given to Indian Oil and Bharat Petroleum. Both Cochin and Madras Refineries had opposed the recommendations as they pointed out that were both expanding capacities and would be able to survive independently.

In any case, they argued, their existing refineries were so heavily depreciated that their survival was not in doubt. And, Cochin Refinery also argued that after its expansion its refining capacity would be larger than Bharat Petroleum8217;s so what was the logic of selling it to Bharat? Indian Oil hadalso opposed the report which had, at that time, recommended that all its existing pipelines, currently worth around Rs 20,000 crore, be spun off into a separate company or be transferred to Petronet this was struck down by the ministry later on. BPCL, the gainer in the exercise, did not protest as it was getting both additional refining and marketing capacity.

What8217;s even more surprising about the move to rush through the modified Sengupta proposals is that the Prime Minister had constituted a Group of Ministers specifically to come up with a Hydrocarbon Vision 2025, and there were six sub-groups constituted under this. Four of these sub-groups have already given their reports these include topics such as the Restructuring of Oil Industry including Divestment8217; headed by T L Shankar of the Administrative Staff College in Hyderabad, and Strategy for Exploration and Production headed by former Petroleum Secretary T N R Rao.

Now surely if these reports of the sub-groups have been submitted already, andthe Group of Ministers is to take a view on this, it does not make sense to push through a very controversial partial-restructuring report like Sengupta8217;s 8212; and that too a report which has not yet been ratified by the Cabinet.

Or, is the need for funds from disinvestment so great that the Government is giving such issues the go by?