BPCL privatisation: Govt has no business to be in business, says Pradhan

Days before the Union Cabinet takes up a proposal to privatise state-owned BPCL, Petroleum Minister Dharmendra Pradhan on Thursday said the government has "no business to be in business", and cited examples of telecom and aviation sectors where opening up had led to increased competition and price cuts to the benefit of consumers.

Refusing to comment specifically on the possibility of the government selling its entire 53.29 per cent stake along with management control in oil marketing and refining firm Bharat Petroleum Corp Ltd (BPCL) for about Rs 60,000 crore, he said the Centre's role should be to create policy framework that guarantees "affordability, accessibility, sustainability and security" of fuel to consumers.

"When Prime Minister (Narendra Modi) says the government has no business to be in business, it is not a slogan. It is a philosophy," he told PTI. "Our PSUs have done a commendable job in the building of modern India and ensuring the availability of fuel to the common man. But the common man will benefit most when there is market competition."

Pradhan said telecom and aviation sectors are shining examples of what competition can do for consumers.

Opening up of these sectors to private players had led to a crash in phone call rates and internet charges and has provided more options and better services to travellers along with affordable airfare.

"This democracy is committed to the common man of the country. We have to create ease of living through more open and process-driven regulation. Product is important, who is running it is not important," he said. "The government has no business to be in business."

The government is keen to get international energy majors such as Saudi Aramco, Total SA of France and ExxonMobil to operate in the downstream fuel marketing business so as to bring in competition.

Currently, 95 per cent of retail petrol and diesel sales and near 100 per cent of cooking gas (LPG) and kerosene sales are controlled by the public sector units.

India is the fastest-growing energy market in the world and the global oil giants are keen to gain a foothold. Acquisition of BPCL, which has 15,177 petrol pumps out of a total of 65,973 outlets in the country, provides an excellent opportunity to gain one-fourth of the market share. The company distributes 21 per cent of petroleum products consumed in the country by volume as of March this year.

The company operates 38.3 million tonnes per annum of oil refining capacities at Mumbai, Kochi, Bina and Numaligarh, which is 15 per cent of India's total refining capacity of 249.4 million tonnes.

BPCL also has more than a fifth of the 250 aviation fuel stations in the country.

Pradhan refused to be drawn into timelines for stake sale in BPCL. "You will know when it happens," he remarked.

It is being speculated that the Union Cabinet may take up a proposal to privatise BPCL as early as next week.

Stake sale in BPCL is critical for the government to meet its disinvestment target of Rs 1.05 lakh crore set for the current fiscal year.

Last year, the government had sold its entire stake in Hindustan Petroleum Corp Ltd (HPCL) to state-owned Oil and Natural Gas Corp (ONGC).

As of March 31, 2019, BPCL reported cash and cash equivalents of around Rs 5,300 crore, against Rs 10,900 crore of debt maturing over the next 15 months.

At current share prices, the value of the government's BPCL stake is worth about Rs 60,000 crore.



Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel