Clear the way for privatization of BPCL, cabinet increases FDI limit

The Union Cabinet approved to increase the foreign investment limit for the public sector oil refinery companies selected for privatization. This move will help in selling the government’s stake in BPCL. Officials said that the cabinet approved a proposal to increase the foreign direct investment (FDI) in public sector refinery companies selected for disinvestment from the current 49 per cent to 100 per cent.

At present, 49 per cent FDI is allowed in oil refineries promoted by public sector companies (PSUs) under the automatic route. Continuing with this limit, Bharat Petroleum Corporation Ltd. (BPCL) could not be sold to any foreign company.

Two foreign companies showed interest

Of the three companies that have given initial expression of interest to buy the entire 52.98 percent stake of the government in BPCL, two are foreign companies. An official clarified, the FDI limit which has been increased is only for matters related to disinvestment.

The FDI limit in oil refineries promoted by public sector undertakings will remain at 49 per cent. This limit was fixed in March 2008. In March 2008, the government raised the FDI limit in PSU-promoted oil refineries from 26 per cent to 49 per cent.

Government is selling stake only in BPCL

At present, the government is only selling stake in BPCL. The country’s largest and second oil refinery and marketing company Indian Oil Corporation (IOC) is under the control of the government. Hindustan Petroleum Corporation Ltd. (HPCL) is now a subsidiary of Oil and Natural Gas Corporation (ONGC).

53000 crores will come to the treasury

According to the current value, the government will get about 53 thousand crore rupees in return for 52.98 percent stake. Before privatization, mutual funds increased their stake in the company from 13.26 per cent to 16.38 per cent in the quarter. Number of mutual funds increased from 369 to 403. Apart from this, FIIs / FPIs have also increased their stake from 11.56 percent to 12.42 percent in this quarter.

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