Privatisation of BPCL

1. Analysis of Privatisation of
BPCL
By-Vijaya Meghana C

2. Privatisation of BPCL
 As of September 2018, 54% of the shares of BPCL were
owned by the Government of India (through the President of
India), with the rest owned by Foreign Portfolio Investors
(17%), BPCL trust for investing in shares (9%), Mutual funds
and UTI (7.5 %), Insurance companies (6%) and the balance
held by individual shareholders.
 As per "India Ratings and Research (Ind-Ra)” a potential sale
of the entire government of India stake of 53.3 percent in
BPCL could result in a re-assessment of linkages between
the government and the OMCs.
 The government stake in BPCL could either be sold to another
OMC or a government entity. Alternately, it could go to a
domestic private sector firm or an international oil and gas
company.

3. The key benefits of stake sale to an
OMC would be:
 the ease of structure with precedent being the Hindustan
Petroleum Corporation Limited (HPCL) - Oil and Natural
Gas Corporation Limited (ONGC) deal last year;
 easier streamlining given OMCs act as a policy
implementation arm of the government providing
subsidised LPG and kerosene;
 lesser complexity compared to privatisation given only
around two months left for FY20 and
 lower resistance from BPCL employees.

4.  With the aim to attract a larger number of investors to take
over public sector oil refiner Bharat Petroleum Corporation
Ltd, the government is looking at further stripping some
assets from the parent entity while splitting the share sale
plan into two phases.
 It is also believed that trifurcation of BPCL's assets may be
carried out before the government's shares are put up for sale
to strategic investors. Also, the government's 53.29 per cent in
the company may be sold in two phases with only between
28-30 percent of the equity shares to be offered in the first
phase to strategic investors with transfer of management
control.

5.  Since BPCL has few joint ventures where the holding of the other partner is
substantial, it would be best to look at exit option from such joint ventures to
avoid complications for strategic investors at a later stage. For
example, Numaligarh Refinery may be carved out of BPCL. BPCL may also
exit from its 50:50 joint venture with Oman Oil Company for 7.8 million tonnes
Bina refinery in Madhya Pradesh before being put to sale to strategic investors.
 Oman Oil may be offered first right to take over balance 50 per cent in Bina
Refinery, or Bharat Oman Refineries.
 The main advantage for the govt will be to garner about Rs 60,000–70,000 crores
to meet its fiscal targets for the FY 2019–20. There will be some uncertainty for
the employees as to how the new management will treat them. But the company
will definitely be on path to recovery with professionalism infused into its
operations. It will be a good news for the shareholding public who can reap in
good returns on BPCL shares which are already on the rise (40% rise in
anticipation of the stake sale).


6. Some reasons for the privatization of the PSUs
like BPCL are as follows:
 It is obvious that the idea of privatization of many PSUs must not have been arisen
instantly but may be the result of many surveys and researches conducted on the
concern. Some reasons for the privatization of the PSUs like BPCL are as follows:
 The PSUs spent unnecessary capital in extra activities including wasting time and
man-power, like expenditure in Hindi Pakhwada, Vigilance Pakhwada, and Swachh
Bharat Pakhwada, etc.
 PSUs are very insensitive to the number of employees and accept the candidates for
employment in large numbers. It results in the wastage of money paid as a salary.
 PSUs are also not concerned about the quality of the services provided and always
prefer a long term tender which reduces the quality of services and wastes the time.
 The Managements in PSUs always fail to conduct a good relation among employees
as the Officers assume themselves the master of the Workmen.

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 The employees of PSUs are often found irresponsible and they
lack accountability. They also found blaming one another for
their faults.
 Red-Tapism is the root of the PSUs and that is why it takes a
long time for any operation to be accomplished.
 The PSUs generally don’t acclaim employees according to
their performances and the best performer is treated in the
same way as a worst or average performer.
 PSUs are often managed by the related ministry and the Board
of directors loses their power which causes failure to the
achievements.

8.  So these are the basic reasons, apart from many
other reasons, which made the Indian Government
think about the Privatization of the PSUs.PROS OF
PRIVATIZATION OF BPCL
 The privatization of PSUs is the need of the time
and is very necessary for the growth of the nation.
The privatization has many strong favors and thus
seems to be profitable for the country.

9. Some of the Pros/advantages of
privatization of PSUs are as follows:
 The PSUs in India are suffering from the problem of
inefficiency and privatization would be the best tool to
remove this inability.
 The privatization of PSUs will reduce the burden of the
Government and will also help in generating financial
resources.
 The privatization will also help in improving the
performances of the employees, making them
accountable and increasing their efficiency.

10.  The private sectors understand better the value of time
and money and so make the optimum utilization of the
resources available.
 The privatization of PSUs will bring competitiveness and
thus increasing their productivity, it will bring them in
the international markets.
 The privatization of PSUs will free them from
Governmental and political interference.
 Privatization will help in removing the bureaucracy from
the Enterprise.


11. CONS OF PRIVATIZATION OF BPCL
 Although privatization will bring many positive changes
in the economy yes it has some dark side too. None of
them can be ignored. Though we have prepared to move
towards privatization, it is very important for us to know
its cons and should work in reducing its effects. Some of
the disadvantages of privatization of PSUs are as follows:
 Although the main goal of privatization is to increase the
efficiency of the Enterprise yet the inefficiency to at a
certain extent is found in private organizations too.

12.  As the PSUs work with the motive of social welfare, the private
enterprises will be mostly concerned about the profit of the
enterprise.
 The privatization of PSUs will reduce the opportunity for
employment.
 It is also seen and is obvious that the employees in private
enterprises often become the victim of exploitation.
 Also, an Industrial dispute is seen in private enterprises which
will be an obstacle in the smooth run of the enterprise.


13. Thanks…....☺