Oilmen move PMO, seek review of BPCL valuation before sale

NEW DELHI: Federation of Oil PSU Officers on Thursday appealed Prime Minister Narendra Modi to reconsider the decision to privatise the country's second-largest oil refiner and marketer BPCL, saying the government can get much more than it is currently expecting from the sale.


In a letter to the PMO, the umbrella body representing state-run oil company executives said their internal valuation of BPCL was over Rs 9 lakh crore, whereas the government has estimated a receipt of Rs 74,000 crore. "Based on the current market price of the immovable assets, replacement cost of the plant & machinery and brand value, the estimated valuation of BPCL done by an internal team comes to be over Rs 9 lakh crore."

The government, however, the letter said, is considering BPCL's current market capitalisation of Rs 1.06 lakh crore and a 30% premium (typically offered for corporate buyouts), the government has estimated a receipt of approximately Rs 74,000 crore through this disinvestment. The letter gives the comparative valuations to say the government will suffer a notional loss of Rs 4.46 lakh crore if it sells BPCl at the current calculation and not taking into account replacement costs.

The letter questions the rationale of selling a modern and highly profitable company such as BPCL, which has contributed Rs 17,246 crore to the government as dividend. Technologically too BPCL has world-class infrastructure and therefore scope for incremental technological improvement by disinvestment is minimal.

"In the past two decades, BPCL has aggressively expanded its marketing network with a determination to remain competitive under all scenarios, thus disinvestment at this stage will be like giving a fantastically engineered marketing machine on a platter," the letter said.

The Federation and Confederation of Maharatna Companies, representing 70,000 officers of top-wrung PSUs, had earlier in the week said privatising BPCL will dent the government's energy justice programme and social obligation schemes besides weakening the security of fuel supplies to defence forces - the main factor that had driven the Centre towards nationalisation of private oil companies after the 1971 war with Pakistan, the officers' unions of public sector bluechips said on Monday.

FOPO convenor Mukul Kumar said they were not against private competition. "They (private players) should not be handed assets built up over years on a platter. Let them come and set up their own infrastructure. We don't have any problem in (successfully) competing against them," he told reporters.

Ruling out strike by the officers, Kumar said they will make a representation to the PM to present the facts and explain their stand. "A private operator will be driven only by considerations of profit and not be bothered about delivering the government's social obligatory schemes or reaching fuel to the remote or difficult areas".

For example, he said a privatised BPCL will not be under the reservation policy for SCs, STs, OBCs, kin of martyred defence personnel or physically challenged while giving jobs, petrol pumps or LPG distributorship; or mandatory 4% procurement of total purchases from SC/ST entrepreneurs.

Moreover, the private sector owner will not invest in social schemes such as Ujjwala as they are a big drag on financial and human resources. BPCL spent around Rs 8,000 crore to issued two crore LPG connections to poor households free of cost under the scheme. They said over 8 crore LPG consumers of BPCL who get subsidy and subsidised diesel supply to fishermen will also suffer. The private operator

A statement issued by the two umbrella bodies later also questioned the reason for privatising BPCL despite being on the "Fortune 500 list for 15 years, sound finances, efficient management that pays over Rs 17,000 crore as dividend to the Central government, has has 6,000 acres of land across India, of which 750 acres is in Mumbai alone valued for crores of rupees".

It said the very reason for nationalisation of

petroleum sector

was to secure supply to the Army and to common people by putting these assets with the government. It pointed to how PSU oil companies have proven to be a saviour in trying times during floods in Kashmir, Uttarakhand and Kerala as well as natural calamities hitting other parts of the country.

BPCL was created by nationalising Burmah Shell in 1974 after the private firm refused to co-operate with the Army in supplying fuel to the remote battlegrounds during the 1971 war. HPCL was created by nationalising Esso and Caltex. The government last year sold its holding in HPCL to state-run ONGC, retaining India's third-largest oil company under its fold.

The Cabinet had last month approved the sale of the government's entire 53.29% stake in BPCL, arguing the resources unlocked by the strategic disinvestment would be used to finance social sector programmes benefiting the public.

Citing past privatisation moves where the new buyer asset stripped the companies they acquired, Kumar said the government should empower the PSUs and give them level playing field to compete with the private sector. "This (

privatisation of BPCL

) is suicidal for the country," he said.

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