The Cabinet Committee on Economic Affairs had on Wednesday decided to sell the government's entire stake in the country's second-largest state refiner BPCL and India's largest shipping company Shipping Corporation of India (SCI). It also approved privatisation of Container Corporation of India while also giving nod to paring stake below 51 per cent in select public sector undertakings but without losing control.
"Since 2014, we have a clear vision that the government has no business to be in business," Pradhan told reporters here. "We have examples of 2-3 sectors such as telecom and aviation where ushering in private participation has led to customers benefiting from price cuts, efficiency, and better service. And yesterday (on Wednesday), several reformist decisions were taken."
BPCL will give buyers ready access to 14 per cent of India's oil refining capacity and about one-fourth of the fuel marketing infrastructure in the world's fastest-growing energy market.
It, however, will be sold after carving out Numaligarh Refinery from its portfolio and given to a pubic sector unit.
"Numaligarh refinery was set up as per Assam Accord and it will remain a public sector unit. Assam Chief Minister had requested Prime Minister (Narendra Modi) to retain public sector character of Numaligarh Refinery and that has been accepted," he said.
Pradhan, however, did not say if IOC or Oil India Ltd, which already has a stake in the refinery and also supplies crude oil to it, will take over the unit.
"The details have to be worked out," he said. "Finance Minister (Nirmala Sitharaman) has stated that the privatisation of BPCL will happen this fiscal and we hope to adhere to the timeline."
Asked if public sector units will be allowed to bid for the government's 53.29 per cent stake, he said: "Nitty gritty and details of the disinvestment process will have to be worked out but when I say the government has no business to be in business, it is indicative of possible future course of action."
At the current trading price of BPCL, the government's 53.29 per cent stake is valued at a shade less than Rs 62,000 crore. On top of this, the acquirer will have to make an open offer to buy an additional 26 per cent stake from minority shareholders for about Rs 30,000 crore.
Last year, the government had sold its entire stake in Hindustan Petroleum Corp Ltd (HPCL) to state-owned Oil and Natural Gas Corp (ONGC) for Rs 36,915 crore.
Pradhan said the privatisation of BPCL was following the policy of ushering in greater competition in sectors that can sustain on their own.
Greater private participation, like in the telecom and aviation sector, will bring about efficiencies and better service to consumers, he said.
The CCEA had on Wednesday also approved the sale of an entire 63.75 per cent government holding in SCI and 30.8 per cent out of the government's 54.80 per cent stake in Container Corp of India (Concor).
Besides, the government will sell its entire holding in THDC India Ltd (THDCIL) and North Eastern Electric Power Corp Ltd (NEEPCO) to state-owned power generator NTPC Ltd, the finance minister has said.
The government holds 74.23 per cent in THDCIL and 100 per cent NEEPCO.
Parallelly, the Cabinet had also approved reducing government stake in select PSUs such as IOC to below 51 per cent while continuing to retain management control.
The management control will continue to be retained with the government after considering equity held by other state-owned companies in the divested firm.
The government, currently, holds 51.5 per cent in IOC and another 25.9 per cent through state-owned Life Insurance Corp of India (LIC), and explorers ONGC and Oil India Ltd (OIL), and the government can potentially sell 26.4 per cent for about Rs 33,000 crore.
A similar formula can also apply to ONGC and gas utility GAIL India Ltd.
The stake sales are critical for the government to meet its disinvestment target of Rs 1.05 lakh crore set for the current financial year.
At current prices, the government's 30.8 per cent stake in Concor is worth about Rs 10,800 crore, while stake sale in SCI will fetch just over Rs 2,000 crore.
BPCL operates four refineries in Mumbai, Kochi (Kerala), Bina (Madhya Pradesh) and Numaligarh (Assam) with a combined capacity of 38.3 million tonnes per annum, which is 15 per cent of India's total refining capacity of 249.4 million tonnes. After removing three million tonnes capacity of the Numaligarh refinery, the new buyer will get 35.3 million tonnes of refining capacity.
It also owns 15,177 petrol pumps and 6,011 LPG distributor agencies in the country. Besides, it has 51 LPG (liquefied petroleum gas) bottling plants. The company distributes 21 per cent of petroleum products consumed in the country by volume as of March this year and has more than a fifth of the 250 aviation fuel stations in the country.
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 greater 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.
As on March 31, 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. ANZ HRS