Land trouble in Kochi may hit govt's plan for strategic stake sale of BPCL

The central government’s plan for strategic stake sale of Bharat Petroleum Corporation (BPCL) to private entities could mean a legal tussle with the Left government in Kerala over a clause on land lease related to the company’s Kochi refinery.

According to documents that Business Standard got access to, in transfer of the refinery’s land, prior approval has to be come from the state government. The CPI(M)-led government has already spearheaded the formation of ‘human chain’ in Kochi against BPCL’s privatisation. And, is unlikely to give its nod if such a clearance is required.

Sources add that the government and employee unions are likely to approach court to disrupt the divestment procedure by citing this. 

“The company shall not be entitled to transfer the acquired land or any part thereof by sale, mortgage, gift, lease or otherwise, except with the previous sanction of appropriate government under section 44A of the Land Acquisition Act 1894 (Amendment Act 1984),” goes one of the lease agreements between the Kochi refinery and the state. 

“Regarding any public sector undertaking in Kerala, our stand is that it should be first discussed with the state government. If the state government is able to acquire it, we will do it,” says E Chandrasekharan, state revenue minister. 

He added that any transfer of ownership must be based on the existing lease agreement. A similar legal issue is likely to crop up in the case of the 7.8 million tonne Bina refinery in Madhya Pradesh; the first right of refusal is with Oman Oil Company.  

At least 25 unions have already called a nationwide strike on Thursday, protesting against the government move to privatise BPCL. “This clause is applicable for a stretch of 600 acres that was allotted for expansion of the refinery in the late 1980s. The unions and the state government will approach the court, as the land cannot be transferred to the private sector without the state’s consent,” said Aji M G, general secretary of the Cochin Refinery Workers’ Association, who is working there as a plant operator. 

The unions have already stated that they will not allow any physical asset valuation at the refineries. An official close to the divestment process said such legal issues will be looked into only after the appointment of legal and transaction advisors, likely on Monday. However, legal experts do also say the said Section 44A might not cause suffice to stop transfer of government stake in BPCL. 

“What the government intends to do here is to sell the shares held by it in BPCL; it does not intend to sell the assets of BPCL by strip sale/ slump sale. It is settled law that shares are assets of the shareholder and not of the issuing company. Thus, even if it is assumed that the said provisions are applicable to the Kochi refinery, it does not restrict the transfer of shares by the government in BPCL,” said Girish Rawat, partner, Dhir & Dhir Associates.

Kishore Nair of the Bharat Petroleum Technical and Non-Technical Employees Association in Mumbai said a major concern for employees is on job security and also whether the private entity will close any loss-making operations.

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