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Disinvestment in Five PSE

  • Category
    Economy
  • Published
    26th Nov, 2019

Recently, Cabinet approves strategic sale of BPCL and 4 other PSUs.

Context

Recently, Cabinet approves strategic sale of BPCL and 4 other PSUs.

About

  • The Cabinet Committee on Economic Affairs approved the strategic disinvestment in Bharat Petroleum Corporation Limited, Shipping Corporation of India, Container Corporation of India, THDC India Limited, and North Eastern Electric Power Corporation (NEERCO) while giving up management control in these companies.
  • It also gave an in-principle approval for the government to reduce stake in certain state-owned companies to below 51 per cent in some while retaining majority stake management control.
  • These major divestment decisions were taken even as the government races against time to meet its highest ever divestment target of Rs 1.05 trillion for 2019-20. The Centre hopes that disinvestment proceeds will make up for some of the revenue shortfall that is expected this year.
  • Privatisation of BPCL will be without the company’s equity shareholding of 61.65 per cent in Numaligarh Refinery in Assam.
  • The Numaligarh Refinery will be carved out of BCPL and will be taken over by another state-owned company
  • Numaligarh Refinery is the largest producer of paraffin wax in the country. The GRM of NRL during FY19 was seen at $11.8 a barrel. The remaining 38.35 per cent stake is held by the Assam government (12.35 per cent) and Oil India (26 per cent).
  • Of the total 249.4 million tonne per annum (MTPA) refining capacity in India, BPCL has around 15 per cent or 38.3 MTPA. BPCL also has 15,177 retail outlets in India.
  • The major reason why Numaligarh was kept out of the strategic disinvestment was because of its importance being part of the Assam Accord of 1985 signed between All Assam Students’ Union and the Centre following the anti-immigrant agitation.

Significance

  • It will provide revenue to the government which is faced with massive shortfall in revenue and capital receipts.
  • It will hand over management of the non-performing PSE to the private management which will make them profitable in the longer run

Criticism

  • BPCL is a profitable refinery and oil marketing company that has consistently paid a healthy dividend. It has also made investments in energy resources and holds interests in overseas hydrocarbon blocks. Privatization of BPCL and saving its stakes in Numaligarh is a clear sign that politics taking precedence over any economic interest.
  • The Centre has very less time to realize these strategic sale proposals to make available the money for the current fiscal.
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