Privatisation drive comes under cloud after court verdict

Tuesday, 16 September 2003, 19:30 IST
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NEW DELHI: India's lumbering privatisation drive is set to hit a bumpy road in the days ahead with the Supreme Court restraining the government from divesting its stake in two oil refining firms without a parliamentary nod. While those opposing privatisation of state-run companies say Tuesday's verdict will force the government to revamp the whole exercise and go slow on selling profit-making state-run firms, others termed it as a "setback" for the reforms agenda. "It will really make the privatisation process very difficult. If it becomes necessary every time to seek parliamentary approval before privatising a company, naturally it will delay the process," said economist D.H. Pai Panandiker. "At this time when everything is considered in the context of elections, I am not sure whether the government will take the issue to Parliament in the near future," Panandiker told IANS. "The government obviously can't risk taking the issue of privatisation of a company to Parliament without ensuring that it would be approved there. The government will now become very cautious in its divestment approach. "This clearly doesn't augur well for the privatisation drive that had generated so much expectations in recent months in the industrial sector as well as in the stock market," he added. The Supreme Court Tuesday restrained the government from selling its stake in public sector Hindustan Petroleum Corporation Ltd. (HPCL) and Bharat Petroleum Corporation Ltd. (BPCL) without seeking parliamentary approval. Counsel for the petitioner had earlier argued that the government could not resort to disinvestment of the two profit making companies without the approval of Parliament. This was because the two companies were taken over by the government by acts of Parliament. The government had planned to sell 35.2 percent equity in BPCL through public offer in domestic and international markets and 34.01 percent equity shares of HPCL to a strategic buyer. Shares of both HPCL and BPCL tanked as much as 16 percent and 14 percent, respectively, on the Bombay Stock Exchange in the early trade as soon as the court verdict entered the market ring. The stock market valuations of HPCL and BPCL had risen sharply in recent months on hopes that the government would be able to complete the process of divesting its stake in the two firms by end of the year. "The decision has come at a time when the market was booming and the market capitalisation of state-run companies had increased manifold. It will certainly dampen investor sentiment," said Neeraj Deewan of Prime Securities. A disinvestment ministry official told IANS that all process related to privatisation of HPCL and BPCL had been stopped with immediate effect in light of the Supreme Court decision. "We will consider all legal options and then decide on the future course of action. The decision does come as a setback to us," said the official, who didn't want to be named. Disinvestment Minister Arun Shourie is in Berlin and couldn't be reached for comment. Prime Minister Atal Bihari Vajpayee's Bharatiya Janta Party (BJP) maintained that the order would not affect the privatisation of public sector undertakings that were not set up by an act of Parliament. M. Venkaiah Naidu, president of BJP, told media persons that the BJP-led National Democratic Alliance government would respect the apex court's verdict and take appropriate measures. The main opposition Congress party, however, hailed the Supreme Court decision saying it would strongly oppose the proposal to privatise HPCL and BPCL when it came up for debate in Parliament. "The decision was on expected lines. HPCL and BPCL were nationalised through an act of Parliament and these two companies can be privatised only through an act of Parliament," said Congress spokesman S. Jaipal Reddy. "We are confident the proposal to privatise HPCL and BPCL would not get parliamentary approval." Said Nilotpal Basu, a lawmaker of Communist Party of India (Marxist): "The government was actually acting against the Constitution by not seeking the parliamentary approval for selling off HPCL and BPCL. "The court decision actually puts the whole process in perspective. It is a very positive development and we welcome it. The government can't sell off national assets bypassing the Parliament." A host of Indian and overseas oil majors, including Reliance Industries and Malaysia's Petronas, had joined the race to pick up the Indian government's stake in HPCL. In March, about 30,000 non-management workers of BPCL and HPCL held a nationwide one-day strike to protest government plans to reduce equity in the firms.
Source: IANS
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