Home / Companies / News /  BPCL sets up new platform for subsidized LPG scheme

Divestment-bound Bharat Petroleum Corp. Ltd (BPCL) has created a separate platform for its liquified petroleum gas (LPG) business that runs the Union government’s subsidized domestic cooking gas cylinder scheme, two people aware of the development said, in an attempt to enable its buyer to “ring fence" and operate the marquee scheme.

According to the plan, the acquirer of the government’s entire 52.98% shareholding in BPCL will run the direct benefit transfer (DBT) scheme, also known as Pratyaksha Hastaantarit Laabh (PAHAL), to deliver cooking gas subsidies to beneficiaries’ bank accounts. A separate platform and mechanism has been developed by BPCL to run the scheme.

The Centre has approved the sale of its entire stake in BPCL, along with the transfer of management control to a strategic buyer, for which the price bids will be called shortly. The successful buyer will not only have a controlling stake in BPCL but will also get access to a 25.77% market share in India’s fuel retailing segment, besides 15.3% of refining capacity.

BPCL operates refineries in Mumbai, Kochi, Bina and Numaligarh, with a combined capacity of 38.3 million tonnes per annum.

A BPCL spokesperson declined comment.

“It’s been made clear that whoever will acquire BPCL will have to run the government’s LPG scheme, wherein the government will bear the subsidy burden. They will have to ring fence that business. Within the organization, they will have to keep it separate and a platform and mechanism has been developed for it by BPCL. It will run on it," said a government official, one of the two persons cited above, requesting anonymity.

Besides Vedanta Group, two American funds—Apollo Global and I Squared Capital—have submitted their expressions of interest (EoI) for India’s second-largest fuel retailer.

The department of investment and public asset management (Dipam) is managing the privatization of BPCL, while Deloitte Touche Tohmatsu India is the transaction adviser.

An external spokesperson for Apollo Global in an emailed response said, “Apollo Global has no comments to offer." A Deloitte Touche Tohmatsu India spokesperson declined comment. Queries emailed to the spokespersons of Dipam, petroleum and natural gas ministry, Vedanta Group and I Squared Capital on Thursday remained unanswered.

The LPG price for cooking for consumers under PAHAL is subsidized by the Union government wherein the subsidy quantum given to the PAHAL consumers by way of DBT is the difference between the market-determined price and the subsidized price.

The Centre has paid 7.03 trillion as fuel subsidy since 2011-12. While petroleum product prices in the country are linked to the price of respective products in the international market, it’s the government which decides the effective price to subsidized domestic LPG consumers. The finance ministry slashed the allocation for LPG and natural gas subsidy to 12,995 crore for FY22.

The preliminary information memorandum/EoI for BPCL’s disinvestment was issued on 7 March 2020, and the last date of EoI submission was extended to 6 November last year. “The price bids will be called shortly," said the first person cited above.

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