The Hindu Business Line : `No rationale in IOC bid for HPCL, BPCL'

"There is rationale in IOC buying IBP Co Ltd, but there is no rationale in IOC buying HPCL and BPCL,'' Mr Pradip Baijal, Secretary, Ministry of Disinvestment, said here on Wednesday at a conference to mark the silver jubilee of Indian Civil Accounts Organisation.

"Why are we wasting our time writing post-APM rules if the two PSUs were to compete with each other to distribute petro products,'' Mr Baijal said.

It made sense for IOC with greater refining capacity but lower distribution network to buy IBP. Healthy competition between private and public sector companies in the oil sector would benefit the consumers, he said.

Later speaking to newspersons, Mr Baijal said the Government would firm up plans for off-loading part of its stake in Maruti Udyog Ltd (MUL) through a rights issue within this month. IPCL would also be privatised by the end of the month.

Responding to queries on valuation, he said prices were determined by the buyer and not by the seller in disinvestment transactions. The discounted cash flow was the best method of valuing PSUs as a going concern.

Though foreign companies had largely shied away from participating in the disinvestment process, their confidence levels would go up as the Government demonstrated its ability to finalise and close deals, he said.

"As the Government moves forward in its disinvestment plan, foreign companies are showing enormous interest in buying PSU shares,'' he said.

The Government had opted for the strategic sale route for disinvestment since the domestic capital markets lacked depth to facilitate public offerings.

Secondly, as the owner of equity it did not want to sell it to middlemen for private companies to make profits through creeping acquisitions.

Besides, the strategic sale plan had fetched far better price earnings ratio for the Government compared with the minority sale of shares, which took place between 1991 and 1997.

According to Mr Baijal, there was enormous scope for turning the country around through privatisation. Though labour and polity had understood it differently, privatisation was not such a bad thing.

For instance, the turnover of Modern Foods had doubled post-privatisation, while Sterlite had signed a five-year wage agreement with Balco employees, which allowed for a 20 per cent increase in wages annually, he said.

The Zuari-Maroc Phosphates combine was also negotiating a new wage agreement with the employees of Paradeep Phosphates, he added.

"But, many of the administrative ministries concerned are blocking the Government from unloading the tax payer from the huge liability of propping up PSUs through capital and financial restructuring schemes costing thousands of crores,'' he said.

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