No open bidding for oil divestment

The CoS was of the view that since the decision to go in for disinvestment of Madras and Cochin refineries, IBP and BRPL was based on the recommendations of the Nitish Sengupta committee, there was no question of accepting only one part of the report and ignoring the other this would lead to unnecessary scandal. Under the Sengupta recommendations, while Bharat Petroleum was to get Cochin Refineries and IBP, IOL was to get Madras Refineries and Bongaigaon. The justification given by Sengupta for his recommendations was that after the complete opening up of the petroleum sector in the year 2002, the smaller and independent oil companies whether refineries or just marketing companies would not be able to withstand the competition. In the event, Sengupta argued that these smaller companies should be merged with the existing oil majors.

While the petroleum ministry was of the view that the report should be accepted, the finance ministry was of the view that open bidding should be the preferred route for disinvestment and that private players should also be encouraged to participate in this. The petroleum ministry argued that it would be foolish to concentrate on just maximising revenues from the proposed divestment, when the purpose of the Sengupta recommendations was also to further strengthen the existing players like BPCL and IOC as well.

Both companies would get additional refining capacity to ensure that their total in-house refining capacity was in keeping with their marketing networks in addition, BPCL’s marketing network would be enhanced by allowing it to take over IBP. While last week’s decision by the CoS has made it clear as to who will get the companies, the price at which the divestment is to take place is still not finalised.