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Why govt is not sure about the BPCL stake sale this year

State-run fuel retailers such as BPCL are racking up losses as they grapple with rising global crude oil costs. (Photo: Reuters)Premium
State-run fuel retailers such as BPCL are racking up losses as they grapple with rising global crude oil costs. (Photo: Reuters)

The govt decided to call off BPCL’s disinvestment last month after interested parties could not continue due to prevailing conditions in global energy markets and the pandemic. It said the decision to reinitiate the process would be taken after reviewing the situation

NEW DELHI : The government is unlikely to restart the disinvestment process for Bharat Petroleum Corp. Ltd (BPCL) this year because of the stock market volatility and soaring energy prices, senior officials said.

“We’re not sure what the level of crude prices will be six months down the line. Going back to the drawing board and restarting the process will take time. It won’t happen at least this year," one of the senior government officials said, requesting anonymity.

A second official said the department of investment and public asset management would focus on completing ongoing transactions before reconsidering privatization.

State-run fuel retailers such as BPCL are racking up losses as they grapple with rising global crude oil costs and retail fuel prices that have been kept unchanged since April to cool inflation. The government has lined up over half a dozen companies for strategic sale, including Shipping Corp. of India, BEML Ltd, Nagarnar Steel Plant of NMDC and HLL Lifecare. The privatization of Central Electronics Ltd (CEL) and Pawan Hans Ltd is also on hold because of legal challenges.

The government decided to call off BPCL’s disinvestment last month after interested parties could not continue due to prevailing conditions in global energy markets and the pandemic. It said the decision to reinitiate the process would be taken after reviewing the situation.

The government invited expressions of interest on 7 March 2020 to sell its 52.98% stake in the fuel retailer and refiner and transfer management control to the buyer. The disinvestment proposal required bidders to have a net worth of $10 billion and excluded public sector units with more than 51% government ownership.

The government received bids for BPCL from miner Vedanta Resources Ltd, private equity firms Apollo Global and I Squared Capital’s Think Gas unit.

Mint had reported in its 23 April edition that the government was weighing options on the strategic disinvestment, including whether it needs to return to the drawing board and restart the bidding process or revise certain conditions in the existing process so that the process moves forward.

On 19 May, Mint had reported that the Centre would come up with a fresh disinvestment plan for the state-run energy company after the completion of the expansion of the Bina refinery in Madhya Pradesh and its green energy initiatives of adding capacities in the solar, wind, hydrogen fuel along with 2G ethanol bio-refineries. Mint reported that the government does not plan to sell its shareholding in parts.

BPCL was supposed to have been one of the marquee transactions under the government’s new disinvestment policy. Mint reported in January 2021 that the transaction could be valued at 90,000 crore. But the market cap of BPCL has dropped since then and may only fetch the government about 37,000 crore at the current valuation.

So far in the current fiscal year, the government has mopped up over 24,000 crore from CPSE disinvestment, including the public listing of LIC of India. The target for the full fiscal year has been set at 65,000 crore. In the last fiscal year, over 13,500 crore was realized via disinvestment, including the privatization of Air India.

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