Govt to soon clarify on allowing 100% FDI in BPCL privatization
Premium- The ministry of commerce and industry will soon clarify that 100% foreign direct investment (FDI) will be applicable in the privatization of Bharat Petroleum Corp
The ministry of commerce and industry will soon clarify that 100% foreign direct investment (FDI) will be applicable in the privatization of Bharat Petroleum Corp. Ltd (BPCL), as the government is exiting the company. The move aims to remove any possibility of confusion, as FDI is now permitted only up to 49% in public sector petroleum refiners.
“100% FDI is already permissible in private sector refining. As BPCL is getting privatized by the government, the same should apply to it as well. DPIIT (department for promotion of industry and internal trade) will soon clarify this," a government official said on the condition of anonymity.
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The current policy permits up to 49% FDI through the automatic route in petroleum refining PSUs, without any disinvestment or dilution of domestic equity in the existing PSUs. However, the policy permits 100% FDI through the automatic route in petroleum refining in the private sector.
“As this is not a policy change and only a clarification, the government can get away with this, though the BPCL privatization process is already on and the deadline for fresh bids is over," an FDI policy expert with a law firm said on the condition of anonymity.
The Centre has approved the sale of its entire 52.98% shareholding in BPCL along with the transfer of management control to a strategic buyer. Preliminary information memorandum/expression of interest (PIM/EoI) for strategic disinvestment of BPCL was issued on 7 March 2020. The last date for submission of EoI was extended a few times up to 6 November 2020. The transaction has now moved to the second stage with the receipt of multiple EoIs.
Petroleum minister Dharmendra Pradhan in December last year said the Centre has received three preliminary bids for the acquisition of controlling stake in BPCL. Vedanta Group and two American funds, Apollo Global and I Squared Capital, have reportedly submitted EoIs.
The decision to privatize the profitable oil marketer is based on the reasoning that the presence of a private sector player would break the state-controlled oligopoly and benefit consumers, minister of state for finance and corporate affairs Anurag Singh Thakur said in the Lok Sabha in a written reply to a question in March.
Strategic disinvestment of PSUs is being guided by the basic economic principle that the government should exit sectors where competitive markets have come of age and the economic potential of such entities may be better discovered in the hands of a strategic investor because of various factors such as infusion of capital, technological upgrade and efficient management practices and would thus add to the overall economic growth of the country, Thakur said.
The government’s ambitious disinvestment schedule for FY22 may get delayed because of the second wave of the covid-19 pandemic that is ravaging the country, disinvestment secretary Tuhin Kanta Pandey said at the Mint India Investment Summit 2021 last month. Pandey, however, exuded confidence that the ₹1.75 trillion target is still achievable. With revenues expected to shrink for the second consecutive year in FY22, achieving the disinvestment target will be crucial for the finance ministry.
A query sent to the commerce and industry ministry remained unanswered till the time of going to press.
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