Why the government pulled out of BPCL’s privatization, read the inside story

The preparation of the government was that first the bidding process is duly completed, after that financial bids would be invited. There was to be an agreement on the term and condition of the share purchase agreement, but before that the two companies withdrew. Now only one company is left in the field.

the government Bharat Petroleum Corporation Ltd.Ted (BPCLThe process of privatization of ) has been stopped for now. It is being said by quoting sources that the government will reconsider the privatization of this oil company. It is also being said that the government will not sell its entire stake in the company. The decision will be taken only after considering how much stake will go into private hands. Privatization of BPCL (BPCL Privatisation) was being said to be the biggest disinvestment in the country. But for the time being it has stopped. Very reliable sources in the government told PTI that three companies were in the process of bidding, of which two had already dropped. So the government had to stop disinvestment.

Apart from Vedanta Group, private equity companies Apollo Global and I Squared’s Think Gas were among the bidders of BPCL. The first two companies expressed their objection to oil prices, on which they exited seeing no solution. After this, only one company was left for bidding. The government was looking to sell the entire 52.98 percent stake in this company. For this, letter of interest or EOI was also floated in March 2020. As of November 2020, at least three bids have come to the fore. But two companies got out of these, due to which only one company was left in the field.

Two out of three companies

The source said that only one bidder is left. Because of this, it does not seem appropriate to think about disinvestment or go ahead. In view of this, the process of disinvestment has been stopped for now. BPCL is the second largest state-owned oil refinery and fuel marketing company in India. Initially, there has not been much interest in the disinvestment of this company because there is a lot of confusion about the price of oil in the world. Oil prices are constantly fluctuating. Due to lack of clarity in the policies for setting the price of oil at the domestic level, the companies withdrew their hands.

About BPCL

BPCL is a public sector fuel retailer company, which has up to 90 percent intervention in the market of petrol and diesel. This company sells petrol and diesel at below cost prices. Because of this, many big companies such as Reliance-BP, Rosneft’s company Nayara and Shell have to sell their oil at a loss. If these companies take the price of oil at the cost price, then there is a fear of getting them out of the market. Mining stalwart Anil Agarwal’s Vedanta Group, US venture fund’s Apollo Global Management and I Square Capital Advisor have bid to buy around 53% stake in BPCL. The current situation is not considered suitable for the oil companies, in view of which both the fund companies decided to withdraw from the bid. However, sources say that the government has not yet invited financial bids.

what were the problems

The preparation of the government was that first the bidding process is duly completed, after that financial bids would be invited. There was to be an agreement on the term and condition of the share purchase agreement, but before that the two companies withdrew. Now it is being said that the government will make all preparations for the privatization of BPCL in a new way and will revise the terms of sale. In view of the Russo-Ukraine war and the new alliance being formed in the world in the oil business, the government will reconsider privatization and may decide to sell 26% stake in 53%. On the basis of this share, companies will invest their money in privatization.

How much will the government earn

Based on the current share, the government’s stake in BPCL works out to Rs 38,000 crore. On top of this, another Rs 18,700 crore will be received from the bidders. If the government sells 26 per cent stake in BPCL, the bidder will have to pay more than Rs 37,000 crore. The government has not formally told anything yet, how many shares will be sold and how much money it is preparing to raise.

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BPCL is India’s second largest oil marketing company after Indian Oil, and with refineries in Mumbai, Kochi and Madhya Pradesh, it has the third largest refining capacity after Reliance and IndianOil. Industry sources said while petrol prices were deregulated in 2010 and diesel in 2014, the government continues to play its role in pricing both the fuels. Because of this also the company is facing many problems.