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Shourie denies rift over oil PSU selloff

Priya Ganapati in Mumbai

Union Minister of Divestment Arun Shourie categorically denied on Thursday that there was any opposition, from members of the ruling Bharatiya Janata Party, over the divestment of the oil PSUs -- HPCL and BPCL.

Notwithstanding the fact that Union Minister of Petroleum Ram Naik is considered to be one of the staunchest opponents to the divestment of the oil PSUs, Shourie said: "The only concern being expressed is by the administrative ministries of that sector. The government is clear that divestment is essential and is committed to it."

Talking to reporters on the sidelines of a meeting arranged by the Indian Merchants' Chamber in Mumbai, Shourie said: "I hear Ram Naik has a formidable presentation (against the divestment of the PSUs) ready for the CCD meeting. But we have our facts at hand and will present it to him and the cabinet committee."

The Cabinet Committee on Divestment is scheduled to meet in New Delhi on September 7 to try and resolve issues relating to the government's divestment programme and especially the sale of equity in Hindustan Petroleum and Bharat Petroleum. The divestment process for HPCL and BPCL has been in limbo for over eight months and Saturday's meeting is seen to help make a decision, one way or the other.

Shourie also denied that ruling coalition member and Minister of Defence, George Fernandes, had any reservations about divesting the oil companies. "Myself and Arun (Jaitley) met with George and spoke to him and he denied many of 'the reservations', against the divestment, that had been attributed to him by the press," Shourie clarified.

He also dismissed reports that had quoted Fernandes as saying that security was of concern if the two major oil PSUs were privatised and that since it is a strategic sector the government should not give uptotal control. HPCL and BPCL together hold 40 per cent of the $15-billion domestic oil market.

"First, George (Fernandes) has denied that statement. And secondly, we import over two thirds of our oil requirements. We have also opened the oil exploration sector, which can raise greater security concerns. There you are letting foreigners map portions of your seabed extensively. All this shows that security is definitely not an issue," Shourie said.

CCD to discuss issue of barring PSUs from bidding

CCD is expected to discuss, among others, a recommendation by a core group of secretaries that no public sector unit should be allowed to bid for other PSUs during the divestment process. The cabinet committee will also look into a calendar prepared by the divestment ministry regarding the sale of 15-20 companies on the government's privatisation list.

"We will prepare a calendar that would list the major milestones that should be achieved so that greater accountability can be brought in," says Shourie.

In the past two years, the government has sold 31 state-owned units and equity worth Rs 835 crores (Rs 8.35 billion) has been sold for Rs 11,350 crores (Rs 113.5 billion). But the divestment process has been fraught with opposition. Till date, there have been over 12 debates in Parliament covering 80 hours and 825 questions on the process.

Though a section of the polity has been suggesting that the divestment ministry look at market sales as an option to share the government wealth with the people, Shourie came out strongly against the idea.

"People's participation is always brought up and it is suggested that the government sell its equity to the people. But what if the people do not want it?" he said, adding, "By offloading government shares in the market you cannot change the character of the company. You cannot change its management or the work culture and so you cannot turnaround the company."

Shourie is clear that strategic sales are the only way for the divestment process to move forward. "If you do strategic sales you can extract a premium from the bidder," he explained.

Consider the example of Indian Petrochemical Corporation Limited, which was recently sold by the government. About a year and a half ago, IPCL shares were quoted at Rs 30 per share on the Indian stock exchanges. As the divestment process for the company gained momentum, its shares rose to Rs 70 per share. But when the government finally sold it to Reliance Industries, the highest bidder, it was for Rs 231 a share.

"If instead we had unloaded it in the market, we would not have got even Rs 70 for a share. The prices would have fallen further. Which is why I don't understand why the talk of people's participation and returning the government's wealth to them comes up," Shourie said.

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