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Oil sector strategic sale regains currency

Aditi Phadnis & Ajay Singh in New Delhi

The politics of divestment took a new turn on Tuesday with a significant section in the government veering round to the original view on oil sector divestment - that a strategic sale of 26 per cent government equity in oil PSUs (Hindustan Petroleum Corporation Limited and Bharat Petroleum Corporation Limited) - is the best option.

Whether this should be done through a consortium with public sector units as junior partners or given outright to the highest corporate bidder is still an open question.

Prime Minister Atal Bihari Vajpayee and Deputy Prime Minister L K Advani have firmed up their view after consulting experts on the issue.

"Whatever success the government has achieved in divestment so far has been through the strategic sale route," said a top government functionary.

The new political thinking in the government rules out the option of divesting oil PSU equity through an initial public offering - a suggestion made by Petroleum Minister Ram Naik and Sangh Parivar constituents like Bharatiya Majdoor Sangh and Swadeshi Jagran Manch.

Defence Minister George Fernandes had voiced his disagreement on both the strategic sale route and the IPO route, pointing out that both could lead to the creation of a private sector monopoly.

He wanted oil PSUs to be given a chance to participate in the bidding process. This might yet be an element in the divestment process.

Though the exact formula for the divestment is yet to get the approval of Vajpayee and Advani, all indications suggest this will be the PM's top priority after returning from the European tour.

"Once they all sit together, convincing Fernandes wont be a problem," said top government sources.

Sources close to Fernandes say his objections to the divestment route were linked to the deputy prime minister's reservations on the issue.

Now, after talks with the prime minister, the deputy prime minister is reportedly of the view that not only should India press forward with divestment but that the process should be linked to market forces.

Therefore, objections related to the formation of private sector monopolies should not be allowed to stymie the process.

The Samata Party, however, argues that in order to prevent private sector oil monopolies, a company that has already bid for and been awarded a disinvested company should not be permitted to bid for the second time in the same sector.

However, this arguments is not likely to find favour in the government because of the obvious flaws - it is aimed at discriminating between corporate houses.

Originally the prime minister and the deputy prime minister had thought that the three-month cool-off period would be sufficient to achieve a consensus on the divestment process.

However, in the meantime the two leaders have noted with unhappiness, the manner in which Bhartiya Janata Party ministers, particularly Ram Naik and Divestment Minister Arun Shourie, have kept on articulating their differences through the media.

"This has caused immense damage to the party and helped our adversaries to highlight our Achilles heal - differences within the government," said a senior party leader.

Senior leaders admit that the public exposure of these differences in the government and the decision of the RSS-BMS-SJM join forces with the anti-divestment faction in the government has proved counter-productive.

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