Govt to Hold BPCL Roadshows in London, US and Dubai in December for ‘Strategic Sale’

Amid strong opposition against the privatisation of Bharat Petroleum Corporation Limited (BPCL), the central government is gearing up for strategic sale of the profit-making public entity. It has been reported that the officials of the Department of Investment and Public Asset Management (DIPAM) and Petroleum Ministry are set to begin the ‘strategic sale’ of BPCL by meeting prospective investors in the scheduled roadshows in London, the US and Dubai in December.

Among the criticism that the government is facing with regard to the sale of BPCL, an important fact is that the government would take a ‘notional loss’ of upto Rs 4.5 lakh crore as the government is eyeing for some Rs 74,000 crore for its stake.

Meanwhile, market sources estimate that an amount of about Rs 1 lakh crore would be needed to fetch the entity at prevailing prices of BPCL shares on the BSE. In contrast to this, a consortium of associations—Public Sector Officers Association, Federation of Oil PSU Officers (FOPO) and Confederation of Maharashtra Company Officers Association (COMCO)—applied replacement value method and estimated BPCL’s assets value at more than Rs 9 lakh crore. Of this, they estimated the government’s 53.29% stake is worth about Rs 5.2 lakh crore.

According to the consortium’s calculation, BPCL’s refining capacity is worth Rs 1.76 lakh crore, terminals (Rs 80,000 crore), retail outlets (Rs 1.5 lakh crore), pipelines (Rs 11,120 crore), brand value (Rs 22,700 crore), upstream business (Rs 46,000 crore) and gas business (Rs 98,500 crore), joint ventures (Rs 82,400 crore), cross-holdings (Rs 53,000 crore), LPG installations (Rs 7800 crore), land (Rs 5,200 crore), aviation stations (Rs 2,800 crore), lubricants business (Rs 1,800 crore), marketing immovable assets (Rs 2,000 crore), tangible assets (Rs 6,300 crore) and the control premium of 30% would fetch Rs 2.2 lakh crore.

The government, however, has not made it clear why it is compromising the sale at such lower value.

Experts are also cautioning the government over the loss in tax revenue with the privatisation of BPCL. It has paid taxes of about Rs 25,000 crore to the government since 2011. According to Trilochan Shastry, a professor at IIM Bangalore, “The effective tax rate on profit before tax for the BPCL is about 34%, whereas for the private sector player it is between 25% and 28%. So, there will be a loss in tax revenue for the government after any privatisation.”

BPCL’s employees, opposition parties including Congress, CPI(M) and other regional parties have been protesting against the ‘hasty’ sale of BPCL.

On November 28, thousands of employees of BPCL, HPCL and ONGC’s subsidiary, MRPL, staged a nationwide one-day strike against the privatisation of public sector units.

BPCL has four refineries located in Assam, Kerala, Madhya Pradesh and Maharashtra with a combined capacity to convert 38.3 million tonnes (MT) of crude oil into fuel. It has 15,078 petrol pumps and 6,004 LPG distributors among other assets.

According to newspaper reports, companies in a race to acquire BPCL are Saudi Aramco, Total, ExxonMobil or Shell and Petronas of Malaysia.

On November 20, the Cabinet Committee on Economic Affairs (CCEA) had directed for sale of government’s entire stake in BPCL along with Shipping Corporation of India (SCI), power generator THDC India (THDCIL) and North Eastern Electric Power Corp (NEEPCO) to a strategic investor along with management control.

BPCL has 24% market share among oil Public Sector Units and reported a net profit of Rs 7,132 crore on a turnover of over Rs 3.37 lakh crore in 2018-19.

In 2017, Russia controlled Rosneft and Trafigura-UCP consortium acquired Essar Oil, which had a refining capacity of 20 MT, a 1,000 megawatt captive power plant and 3,500 fuel stations for $12.9 billion (around Rs 83,000 crore).