Sale of stake in oil refiners delayed

By India Abroad News Service   |   Monday, 09 September 2002, 07:00 Hrs
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NEW DELHI: The Indian government's plans to sell its stake in two of the nation's biggest refiners has been delayed due to lack of a political consensus on the issue within the ruling coalition government.

At a high-level meeting here Saturday, it was decided to defer the sale of Hindustan Petroleum Corporation Ltd. (HPCL) and Bharat Petroleum Corporation Ltd. (BPCL) by three months, official sources said.

The meeting was chaired by Prime Minister Atal Bihari Vajpayee and attended by Deputy Prime Minister Lal Krishna Advani, Defence Minister George Fernandes, Petroleum Minister Ram Naik and Disinvestment Minister Arun Shourie.

The petroleum ministry is opposed to the sale of government equity in BPCL and HPCL. It says the petroleum sector needs more investments before these companies are sold to private entities.

The disinvestment ministry has, on the other hand, held that sale of equity can fetch the best price only when it is offered to a private party and that it should be done at the earliest.

Defence Minister George Fernandes, a member of the ruling coalition, has also asked for a review of the sale, citing security worries. Vajpayee and Advani had met Fernandes this week to assuage his concerns.

HPCL and BPCL account for 40 percent of India's oil market. The government owns 51 percent of Hindustan Petroleum and 66 percent of Bharat Petroleum.

The latest setback to the country's ambitious privatisation drive comes after the government ignored opposition to the sale of its stake in a telecom giant, an oil firm and the country's largest joint venture carmaker earlier this year.

India plans to raise 120 billion from sales of shares in state-owned firms in the current financial year. It has repeatedly failed to meet targets in the past because of stiff protests from opposition parties and trade unions.

There are about 240 state-run firms in India, most of which are running at a loss.

Analysts say if the cash-strapped government manages to raise half of its 120 billion target, it would greatly help in bridging the spiralling fiscal deficit.

The government plans to rein in the federal fiscal deficit to 5.3 percent in the year ending March 31, 2003, from 5.7 percent in fiscal 2001-02.

Petroleum minister Naik remains steadfast in its stand that a public offering of HPCL and BPCL shares was the best way forward. And the tough stance taken by Fernandes, who is not on the cabinet panel for privatisation, has emboldened Naik.

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