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NEW DELHI : The government called off the strategic sale of Bharat Petroleum Corp. Ltd (BPCL) after companies that showed initial interest in buying the country’s second-largest state-run refiner changed their minds as the outlook for Indian refiners soured because of the pandemic and soaring global energy prices that forced them to sell fuel below cost.

The department of investment and public asset management (Dipam) said in a statement on Thursday that a decision on re-initiating the strategic disinvestment process will be taken after reviewing the situation.

“The multiple covid waves and geopolitical conditions affected multiple industries globally, particularly the oil and gas industry. Owing to prevailing conditions in the global energy market, the majority of qualified interested parties (QIPs) have expressed their inability to continue in the current process of disinvestment of BPCL," the department said.

“Based on decisions of the alternative mechanism (empowered group of ministers), the government of India has decided to call off the present EoI (expression of interest) process for strategic disinvestment of BPCL, and the EoIs received from QIPs shall stand cancelled," the department added.

Indian fuel retailers such as BPCL are losing money as they have failed to pass on the soaring costs of crude oil to consumers. Crude prices have rallied after Western nations imposed sanctions on Russia, one of the world’s largest energy producers, following its invasion of Ukraine in February.

Rising oil prices and an increasing tilt towards green energy have thrown up fresh issues for bidders, posing challenges for the disinvestment process.

Expression of interest, or EoI, for strategic disinvestment of BPCL was issued on 7 March 2020. In a strategic disinvestment, the government was set to sell its full shareholding of 52.98% in the public sector enterprise and transfer management control as part of its overall disinvestment strategy.

The disinvestment proposal required bidders to have a net worth of $10 billion and excluded public sector units with government ownership of 51% and more. The government received bids for BPCL in November 2020 from miner Vedanta Resources Ltd, and private equity firms Apollo Global and I Squared Capital’s arm Think Gas. Vedanta was the only player in the fray after the exit of Think Gas.

Crude prices in India were at $33.36 per barrel in March 2020, when EoIs of BPCL were floated. In FY20, the average prices were at $60.47 per barrel, which fell to $44.82 in FY21 but rose sharply to $79.18 in FY22, according to data from the Petroleum Planning and Analysis Cell.

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

On 19 May, Mint reported that the Centre would frame a fresh disinvestment plan for BPCL after the completion of expansion of the Bina refinery in Madhya Pradesh and its green energy initiatives of adding capacities in the solar, wind and hydrogen sectors along with 2G ethanol bio-refineries.

An official said earlier that the value that the government will receive from the deal is a key factor since BPCL’s share price has fallen over the past year.

In April 2021, the stock was trading in the range of 418 to 422, but this April, it fell to the 374-390 range. On Thursday, the shares fell 0.54% to 324.25 on BSE. At the current share price, BPCL is valued at 70,338 crore, lower than over 90,000 crore back in November 2020 when it had received the bids. The government would get about 37,265 crore from the transaction at the current valuation. In March 2021, BPCL sold its 61.65% stake in Numaligarh Refinery Ltd for 9,875 crore to Assam and a consortium of Oil India Ltd and Engineers India Ltd as part of the privatization process.

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