The Commerce and Industry Ministry has decided to set a draft cabinet note on a proposal for 100 per cent foreign direct investment in government-owned refineries. If approved, it could pave the way for privatising Bharat Petroleum Corporation Limited, the second-biggest oil refiner in India.
As per ministry sources, the government has introduced a draft cabinet note to obtain inter-ministerial views. GOI intends to introduce a new clause in FDI policies for petroleum and natural gas sector through this draft note.
The government has a stake of 52.98% in Bharat Petroleum Corporation Limited presently. However, it wishes to privatise this entity by selling its entire stake. This divestment in BPCL is a part of the government’s divestment target of Rs. 1.75 lakh crores for the fiscal year 2022.
The Department of Promotion of Industry and Internal Trade will place this proposal in front of the Cabinet. According to this proposal, the government would allow 100 per cent foreign direct investment through an automatic route for those PSUs granted an “in-principal” approval for privatisation.
Existing FDI regulations allow 49% foreign direct investment in public sector entities without diluting the domestic equity of these PSUs.
Indian mining conglomerate Vedanta has offered an expression of interest (EoI) to purchase the government’s stake in BPCL. Apart from Vedanta, other global players have shown interest in buying the 52.98% share. These include popular private equity firm Apollo Global Management, and I Squared Capital’s subsidiary Think Gas.
The Commerce and Industry Ministry will ask for approval from the Cabinet on this proposal once it collates all necessary views. An official of the ministry states that it is only natural to permit 100 per cent investment if foreign players are invited to bid.
Before privatisation is complete, the government will allow BPCL to sell its stake in Indraprastha Gas Ltd. and Petronet LNG. The state-run refiner is a promoter in these two entities. By way of this, new owners of BPCL cannot make open offers to shareholders of these companies.
The government aims to ease the financial crunch amidst this ongoing pandemic and subsequent lockdown through divestment of state-run assets.
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