BPCL Privatisation

1. BPCL
Privatization
- Neha Tolani
- Amity University

2. About BPCL And Its Privatization
O THE GOVERNMENT has invited Expressions of Interest (EoI)
from interested parties with a net worth of at least $10 billion for
the strategic sale of Bharat Petroleum Corporation Ltd
(BPCL) — one of the largest oil marketing and oil refining
companies in India with a refining capacity of 38.3 million metric
tonnes per annum or about 15% of the total refining capacity in the
country.
O Divestment of the government’s 52.98% equity stake in BPCL will
form a key part of its Rs 2.1 lakh crore disinvestment target for the
next fiscal. The government has, however, excluded BPCL’s stake
in the Numaligarh refinery, which has a refining capacity of 3
million metric tonnes per annum, from the divestment process as it
intends to sell it to another PSU.

3. Government Wants To Sell It's Stake In
BPCL Because -
O It has huge fiscal deficit and it doesn't want to borrow money from
outside or from local markets
O India is long been know for it's socialist inclination where the state
owns and controls means of production. This also earns us a
reputation of having RED TAPE i.e. Beaurocratic hurdles. There is a
saying about India “ India give Red Tape while as China gives you
Red Carpet
O BJP has a long staring views of privatizing PSUs to open up the
market and send positive signals to the foreign companies and
investors.

4. Why The BPCL Privatization Is
Encouraged -
O Narrow Fiscal Deficit: Recently Govt. Of India slashed corporate tax to 25% which is the highest
contributor of Govt’s tax. This would widen India’s fiscal deficit. But the money which Govt will
get from it’s stake sale in BPCL will help to reduce the fiscal deficit.
O Why should Govt be in the business of running a business. Many economists and well known
investors such as Rakesh Jhunjhunwala are of the view that Govt should not be in the business of
running a business. Selling its entire stake in BPCL would ensure that Govt will have less
interference in prices of Petrol and Diesel. It has been observed that during elections if there is
increase in price of international Crude Oil, prices of Petrol and Diesel remains unchanged. This
leads to huge losses for OMCs.
O History of mismanagement of Public Undertaking Companies.
O BSNL 10years back was having a Market Cap of Rs 100000 Cr+. Now the situation is the
Govt. needs to pump additional rs 100000 Cr to make it functional and pay its employees
salary.
O MTNL 20Years back had a Market of Rs 20000 Cr whereas Reliance which is currently
India’s largest company by M.Cap was back then valued at Rs 25000Cr. Today MTNL has
M.Cap of Rs 400 Cr whereas Reliance has M.Cap of Rs 800000+ Cr.

5. Reasons for Privatization
O It is a widely accepted political belief that ( including ruling Party)
“the government has no business being in business”. That is, the
government’s role is to facilitate a healthy business environment but
the core competence of a government does not lie in selling fuel or
steel at a profit. That is one reason that divestment is often a priority
item in the election manifesto of such parties. Also PSU was created
to make a industrial environment and support basic infrastructure
O privatisation of public enterprises it is also argued that it will end
state monopolies in certain industries. State monopoly is said to be
as bad and undesirable as private monopolies. The privatisation of
some monopolistic public enterprises would infuse competition
which will lead to increase in efficiency and productivity.
O . It will help to inject foreign capital and forge strategic alliances.

6. Reasons Against Privatization
O .Privatization of PSU ( specially the profit making ones) on the sole ground
of massive shortfall of revenue , capital receipts and to narrow the yawning
fiscal gap is never justified and it is an expedient exit .
O Government after the failures of its economic policy including
Demonetization, GST implementation etc , are in a desperate need of
money. It is bound that at some point there would be nothing left to sell and
the economy will collapse.
O .PSU being state owned company its profit is also the profit of the common
people; in other way every Indian Citizen is a stake holder of the PSU’s gain
.On the other hand profits of private players goes to handful people.
O .Disinvestment will create job losses and also it will be not labor friendly .
O .Disinvestment have been failed to provide solution for loss-making sick
public sector undertakings.

7. Thank You!