Friday, October 7, 2022

The legal hurdle on the road to BPCL disinvestment

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New Delhi: The disinvestment of Bharat Petroleum Corporation Ltd (BPCL) could throw up major legal challenges for the government because of a Supreme Court ruling that mandated the Centre to get a nod from the Parliament first, sources said. The government is now seeking fresh legal opinion before it goes ahead with the proposed BPCL disinvestment to avoid legal hassles. “BPCL and HPCL were acquired through an Act of Parliament.

In these two cases, the Supreme Court also gave an order restraining the government from selling its equity without Parliamentary approval. After this, several legislations were repealed by the government through the 2016 Repeal Act. We need to see what the Repeal Act says. As the narration becomes clear and legal people check whether Parliamentary approval is needed or not needed, the privatisation of BPCL can go through,” a top official at a state-owned oil marketing company said.

The 2003 precedent in BPCL disinvestment

The government is seeking legal opinions on the matter, especially keeping in mind the 2003 precedent which was the last time the government tried to disinvest BPCL. In 2003, when a similar proposal on BPCL disinvestment was taken by the government, it had faced serious legal challenges that resulted in the Supreme Court ultimately axing the plan and asking the government to seek the Parliament’s nod before selling its stake. The attempt to sell a majority stake in BPCL is the first serious attempt undertaken by the government towards the privatisation of PSUs after the Vajpayee era. Under the former NDA-led government headed by Prime Minister Atal Bihari Vajpayee, the government had sold its stake in PSUs such as Videsh Sanchar Nigam Ltd, Hindustan Zinc, BALCO and IPCL to private entities.

Little clarity on what the govt is going to do this time

“As of today, I don’t think the full details are available on the modalities and the methodologies which are going to be followed. Based on that only, something can be said otherwise it will be premature,” another senior executive of an OMC said. The government is planning to offload its entire 53.3 percent stake to a strategic partner. This could either be done at one go or in parts. The government may also decide to retain part of its equity. However, a final call on the matter will be taken after getting a sense of investor interest for the profit-making PSU.

Who could be interested in BPCL?

Industry experts have hinted that BPCL could be a prized investment for foreign entities from Russia and the Gulf region. The offer would be attractive for companies ranging from Saudi Aramco of Saudi Arabia to French energy giant Total SA which are vying to enter the world's fastest-growing fuel retail market. And BPCL will offer them a formidable presence in India’s retail market. If none of these plans fall through, the government has kept other oil PSUs, like Indian Oil Corporation (IOC) or Oil India Ltd (OIL) on standby, who would then go for share buybacks.

The backdrop

The Repealing and Amending Act, 2016 had quietly annulled 187 obsolete and redundant legislations on the statute books. In this process, the laws under which oil companies like HPCL and BPCL were nationalised, were also repealed. These included the Esso (Acquisition of Undertakings in India) Act, 1974, The Burmah Shell (Acquisition of Undertakings in India) Act, 1976, and the Caltex (Acquisition of Shares of Caltex Oil Refining (India) Limited and of the Undertakings in India of Caltex (India) Limited) Act, 1977. Now the 2016 Repealing Act is being cited to conclude that BPCL privatisation may not require a Parliament nod.

(PSU Watch– India's Business News centre that places the spotlight on PSUs, Bureaucracy, Defence and Public Policy is now on Telegram. Join PSU Watch Channel in your Telegram and stay updated)

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