The Union government is likely to allow full ownership of public sector refiners by foreign entities. Though this is an enabling provision required for the disinvestment of Bharat Petroleum Corporation (BPCL), it potentially means all public sector refiners, except a “bare minimum” (which can be even one), may have complete foreign ownership.
The government is yet to decide the minimum number of public sector enterprises (PSEs) for strategic sectors that it identified in February this year. The changes in the FDI
regime are likely to be for the entire refining sector, similar to the exemption given in 2017 to all mergers and acquisitions, involving public sector oil and gas companies, from seeking the Competition Commission of India’s approval. This was done to facilitate Oil & Natural Gas Corporation (ONGC) buying out the government’s stake in Hindustan Petroleum Corporation (HPCL), said an official in the know.
The change in the FDI
regime in sale of PSU ownership of refining companies
is required since most bidders that had put in expressions of interest (EoIs) for BPCL
have foreign investment. The government has not revealed the names of companies
that have put in EOIs. Billionaire Anil Agarwal’s Vedanta had formed a special purpose vehicle with its London-based parent Vedanta Resources, and submitted an EoI to acquire BPCL; other suitors reportedly are Apollo Management and Think Gas, promoted by I Squared Capital.
The change in FDI
norms for PSUs will require the Cabinet’s approval; it will be later notified by the department for promotion of industry and internal trade (DPIIT).
Under the Atmanirbhar Bharat package, Union Finance Minister Nirmala Sitharaman last year had announced the change in the disinvestment strategy of the government. “The government will announce a new policy, which will broadly categorise strategic sectors and others. The strategic sector in which PSEs will be present will be notified and in those notified sectors, at least one PSE will be present while private will also be allowed to play their role in it,” she said on May 17, 2020. Strategic sectors would have not more than four PSEs and the remaining ones would be either privatised, merged or brought under a holding company, she had said. "Either they will be merged, or they will be brought together in such a way that there are only four or less. So, there won't be mushrooming PSEs in those notified sectors.”
The PSE policy of February 2021 later said: “In strategic sectors, a bare minimum presence of the existing public sector commercial enterprises at the holding company level will be retained under government control. The remaining enterprises in a strategic sector will be considered for privatisation
or merger or subsidiarisation with another PSE or for closure.” This could, however, mean the government could retain its ownership of, say, ONGC alone and could choose to sell all its other companies
to foreign refiners.