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Naik meets Advani on divestment of oil PSUs

A day ahead of the crucial meeting of the Cabinet Committee on Divestment, Petroleum Minister Ram Naik on Friday met Deputy Prime Minister L K Advani and discussed the controversial issue of privatising oil PSUs BPCL and HPCL.

After the meeting, Naik said he would make a presentation tomorrow before the CCD on privatisation of oil PSUs - Hindustan Petroleum and Bharat Petroleum and hoped that the CCD would take an appropriate decision on it.

"I am sure the CCD will take an appropriate decision taking into account the issues involved," he said.

Divestment of the two oil PSUs became a bone of contention between Naik and Divestment Minister Arun Shourie with the former seeking an initial public offer prior to privatisation while opposing strategic sale of government equity in these corporations.

Naik is believed to have reiterated his views before Advani and suggested that other oil PSUs like Oil and Natural Gas Corporation should not be barred from bidding for HPCL and BPCL in the face of Shourie's proposal to keep all the PSUs at bay from the privatisation process.

In his presentation, finalised for CCD after a marathon meeting with Petroleum Ministry officials today, Naik is understood to have insisted of completion of ongoing refinery projects at Bina and Bathinda of BPCL and HPCL respectively at a combined investment of about Rs 17,000 crore (Rs 170 billion).

Shourie, on the other hand is understood to have rejected the suggestion on the ground that the choice for completion of the project, where already an investment of over Rs 600 crore (Rs 6 billion) has been made, be left to the new strategic partners and refused to make it a bidding condition on the ground that it could affect the valuation.

Naik is believed to have impressed upon Advani on issues like allowing of BPCL and HPCL to raise resources for completing their 6 million tonnes Bina and 9 million tones Bathinda refinery, respectively.

The refinery projects, according to Naik, are essential for meeting demand of Madhya Pradesh and Punjab and adjoining states.

Divestment ministry, at the CCD meeting on Saturday is likely to move a proposal for sale of 36.4 per cent equity in BPCL and 26 per cent equity in HPCL to strategic partner.

Sources said Naik would make a presentation to the CCD highlighting the strategic importance of oil sector drawing parallel with the 1971 experience when the privatised oil sector refused to cooperate with government during the war.

Naik would oppose strategic sale, sources said adding if strategic sale is what CCD decides, than Naik is likely to bargain for allowing public sector companies like Oil and Natural Gas Corporation to bid.

Naik would impress upon the Cabinet on the need for bidding the strategic partner with commitment to complete Rs 9,500 crore (Rs 95 billion) Bathinda refinery and Rs 6,500 crore (Rs 65 billion) Bina refinery.

Divestment ministry, on the other hand is likely to tell the Cabinet that the projects are financially unviable in light of excess refining capacity in the country, sources said.

Naik would seek to counter the argument that presenting demand growth profile of 3.7 per cent (worst case) and 5.7 per cent (best case), and both the demand projections have leverage to absorb the two refinery capacities, they added.

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