BPCL at the close of market on October 4 had a market capitalisation of about Rs 1.11 lakh crore.
New Delhi: Ahead of a proposed move to fully privatise state-owned fuel retailer Bharat Petroleum Corp Ltd (BPCL), the government had quietly repealed the legislation that had nationalised the company, doing away with the need to seek Parliament nod before selling it off to private and foreign firms.
The Repealing and Amending Act of 2016 had annulled "187 obsolete and redundant laws lying unnecessarily on the Statue-Book" including the Act of 1976 that had nationalised erstwhile Burmah Shell.
"The Act has been repealed and there is no need for a Parliament approval for strategic sale of BPCL," a senior official said.
Keen to get multi-nationals in domestic fuel retailing to boost competition, the government is mulling selling most of its 53.3 per cent stake in BPCL to a strategic partner.
Privatisation of BPCL will not just shake up the fuel retailing sector long dominated by state-owned firms but also help meet at least a third of the government's Rs 1.05 lakh crore disinvestment target.
BPCL at the close of market on October 4 had a market capitalisation of about Rs 1.11 lakh crore and a government stake sale could get upwards of Rs 60,000 crore including a control-and-fuel-market-entry premium, officials said.
The Supreme Court had in September 2003 ruled that BPCL, as well as Hindustan Petroleum Corporation Ltd (HPCL), can be privatised only after Parliament amends a law it had previously passed to nationalise the two firms.
The ruling had followed a plan of the then BJP-led NDA government headed by Prime Minister Atal Bihari Vajpayee to privatise the two firms.
The apex court ruling had stalled the plan to sell 34.1 per cent out of government's 51.1 per cent stake in HPCL to a strategic partner along with management control. Reliance Industries Ltd, BP plc of UK, Kuwait Petroleum, Petronas of Malaysia, the Shell-Saudi Aramco combine and Essar Oil had expressed their interest in acquiring that stake before the Supreme Court stalled the process.
But the Supreme Court mandated condition is no longer applicable, they said citing the May 9, 2016, Gazette notification following President's assent to The Repealing and Amending Act, 2016.
Besides others it listed repealing in "the whole" The Esso (Acquisition of Undertakings in India) Act, 1974, The Burmah Shell (Acquisition of Undertakings Act, 1976 and The Caltex [Acquisition of Shares of Caltex Oil The whole] Refining (India) Ltd and of the Undertakings in India of Caltex (India) Ltd] Act, 1977.
According to the Statement of Objects and Reasons for the Repeal Bill introduced in the Lok Sabha on May 13, 2015, the idea was to bring reform in the legal system by removing "incoherent and redundant laws."
"...the present proposal is to repeal 187 obsolete and redundant laws lying unnecessarily on the Statute-Book. On being enacted, it would reduce obsolete laws and bring in clarity to those for whose benefit the laws are enacted," it said.
BPCL offers attractive buy for companies ranging from Saudi Aramco of Saudi Arabia to French energy giant Total SA which are vying to enter the world's fastest-growing fuel retail market. It will not only give them 34 million-ton in refining capacity but also access to about 25 per cent share of India's fuel marketing.
BPCL was previously Burmah Shell, which in 1976 was nationalised by an Act of Parliament. Burmah Shell, set up in the 1920s, was an alliance between Royal Dutch Shell and Burmah Oil Co and Asiatic Petroleum (India).
HPCL was incorporated in 1974 after the takeover and merger of erstwhile Esso Standard and Lube India Ltd through the ESSO (Acquisition of Undertaking in India) Act passed by Parliament. The company was in January last year taken over by state-owned Oil and Natural Gas Corp (ONGC) for Rs 36,915 crore.
The Supreme Court had in September 2003 cited the ESSO (Acquisition of Undertaking in India) Act and the Burmah Shell (Acquisition of Undertaking in India) Act, 1976 and Caltex (Acquisition of Shares of Caltex Oil Refining India Ltd and all the Undertakings in India for Caltex India Ltd) Act, 1977 to rule that the government cannot privatise HPCL and BPCL without approaching Parliament for changing the Nationalisation Act.
"There is no challenge before this Court (Supreme Court) as to the policy of disinvestment. The only question raised before us whether the method adopted by the Government in exercising its executive powers to disinvest HPCL and BPCL without repealing or amending the law is permissible or not. We find that on the language of the Act such a course is not permissible at all," Justice S Rajendra Babu and G P Mathur wrote in the September 16, 2003 order "restraining the Central Government from proceeding with disinvestment resulting in HPCL and BPCL ceasing to be Government companies without appropriately amending the statutes concerned suitably."
BPCL operates four refineries at Mumbai, Kochi in Kerala, Bina in Madhya Pradesh and Numaligarh in Assam with a combined capacity to convert 38.3 million tonnes of crude oil into fuel. It has 15,078 petrol pumps and 6,004 LPG distributors.
India has a total refining capacity of 249.4 million tonnes and 65,554 petrol pumps and 24,026 LPG distributors.