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BPCL DISINVESTMENT

Bharat Petroleum Corporation Limited (BPCL), founded in 1952 is an Indian Government controlled Oil and Gas Company. The company operates in Refinery and Marketing activities which include downstream petroleum sector. BPCL and other oil marketing companies (OMC’S) derive the petroleum products from crude oil. The products obtained from the refining process are LPG, Petrol, Kerosene, Fuel, Diesel, etc. They have a distribution network across the country and sell their products through a self outlet or dealers.



Disinvestment

Divestment or disinvestment means selling a stake in a company, subsidiary or other investments.


Disinvestment of BPCL

On Nov 21, 2019, Finance Minister Nirmala Sitharaman announced the Strategic Disinvestment of BPCL’s 52.98% equity stake along with transfer of management control to a strategic buyer except for its equity shareholding of 61.65% in Numaligarh Refinery Ltd in Assam, Numaligarh Refinery Ltd Stake will be sold to a state-owned oil and gas firm.


Criteria of Disinvestment

Public sector undertakings (PSUs) "are not eligible to participate"

Any private company having a net worth of USD 10 billion is eligible for bidding and consortium meaning association of not more than four firms will be allowed to bid, The Lead member of the consortium must hold a 40 per cent stake and others must have a minimum net worth of USD 1 billion.


The Bidders

According to official sources, Saudi Aramco, Abu Dhabi National Oil Co (Adnoc), Rosneft of Russia and Exxon Mobil intend to participate in the bidding process.

In the words of energy expert Narendra Taneja, expression of interest from big players is because India is likely to become the most lucrative retail market for oil in the world in the upcoming 20 years.

Securing the Demand is another reason for some of the upstream bidders to bid for a downstream company like BPCL. Upstream bidders that is the Oil Exploration and production companies have an opportunity to secure their demand by supplying their products to the downstream that is concerned with refining, processing, purifying of crude oil, raw natural gas etc.


Causes

  • Petroleum Minister Dharmendra Pradhan and PM Narendra Modi said citing the examples of Telecom and Aviation sectors that privatisation has led to increased competition and price cuts to the benefit of consumers and that the common man will benefit the most.

  • Acquisition of BPCL provides an excellent opportunity to gain one-fourth of the market share.

  • Privatisation of BPCL is essential for meeting the record Rs 2.1 lakh crore target Finance Minister Nirmala Sitharaman has set from disinvestment proceeds in the budget for 2020-21.

Effects

  • The share price of BPCL surged due to the interest shown by the global oil majors and Reliance.

  • The government is weighing a plan to give job protection to employees of BPCL for three to five years post-privatisation, The move to consider a longer job protection period comes in the wake of opposition from workers union to a voluntary retirement scheme (VRS) and also, with the aim of diluting workers’ resistance to the deal.

  • Given the further requests received from the Interested Bidders and the prevailing situation arising out of Covid-19, last date and time for submission of EOI is extended up to September 30, 2020, “the Department of Investment and Public Asset Management said in a notice.

The biggest question being raised is on selling a profitable company?, Think of it yourself If given a choice would u want to invest in a profit-making and an efficient company or a loss-making one? The same thing is with the bidders, nobody wants to buy a loss-making company, one can cite the example of "AIR INDIA", Since years The government is trying to sell but not yet accomplished it. Also, The government has planned to sell the second-biggest oil and gas company, IOCL remains under government control.

As well said, "Rome was not built in a day" The effects of the disinvestment shortly, slowly and steadily may have a positive impact.

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