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Disinvestment: Is Indian Oil going to buy Numaligarh Refinery Ltd?

There could be some changes in the government’s disinvestment plan for Numaligarh Refinery and the ball may finally land in Indian Oil’s court, sources have said

  • With the global crude oil prices witnessing an unprecedented fall in the past week, the previous plan that was on the table now seems to be in peril

  • The next best candidate to pick up the government’s stake in Numaligarh Refinery now seems to be Indian Oil

New Delhi: With the COVID crisis dealing a body blow to the oil market, there could be some changes in the government’s disinvestment plan for Numaligarh Refinery Ltd and the ball may finally land in Indian Oil’s court, various sources have told PSU Watch on the condition of anonymity. Numaligarh Refinery is currently a subsidiary company of Bharat Petroleum Corporation Ltd. In November 2019, when the government announced its plan for BPCL privatisation, it also said that Numaligarh Refinery will be carved out of BPCL and sold off to a PSU and will continue to be a public sector-owned entity.

However, with the global crude oil prices witnessing an unprecedented fall in the past week, the previous plan that was on the table now seems to be in peril.

Numaligarh Refinery disinvestment: What was the previous plan?

A source at Numaligarh Refinery told PSU Watch that earlier, the government was looking to sell off Numaligarh Refinery to Oil India Limited. Another source at Indian Oil said that at the time the announcement was made, Indian Oil had thrown its hat in the ring, but a group of Assam MPs were of the view that Numaligarh Refinery should go to Oil India Limited.

“However, with the oil market in the condition that it is in, it is impossible for Oil India to now pick up the government’s stake in Numaligarh Refinery. Neither can ONGC. For E&P companies, raising a loan from the market, too, is going to be difficult,” said the former source. PSU Watch had earlier reported that ONGC had asked the government to waive off oil cess and royalty payment in view of the fact that the average price realisation per barrel was not even enough to meet the operational cost. 

The next best option happens to be Indian Oil

The next best candidate to pick up the government’s stake in Numaligarh Refinery now seems to be Indian Oil. The source at Indian Oil said, “It is quite possible for the management to consider this plan because there is a synergy between the two companies. The acquisition will also be beneficial if you look at it from the view that the privatisation of BPCL will hand a sizeable chunk of market share to a private player.”

However, he added that if Indian Oil is to go ahead and pour in money to buy the government stake in NRL, it will have to take up its asset monetisation plan, which had been put on the back burner as of now. “The decline in fuel demand because of the Coronavirus lockdown has dealt a blow to Indian Oil’s revenue. Additionally, the profit margin in LPG cylinders is wafer-thin. We have also been giving free refills under Ujjwala. So, if at all, Indian Oil goes ahead and picks up a stake in Numaligarh Refinery, then asset monetisation would become a necessity.”