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IOC valuation of IPCL plant leads to deadlock

Vinod Mathew

AHMEDABAD, Aug. 16

IT was not the proverbial slip between the cup and the lip. The gap between the Indian Oil Corporation Ltd (IOC) acquiring the Vadodara plant of Indian Petrochemicals Corporation Ltd (IPCL) and letting it remain as another chapter of the long-winding dra ma over the disinvestment of the petrochemicals company stood at over Rs 550 crore, according to Ministry sources.

The Committee of Disputes, under the Cabinet Secretariat, which had its last session with the disputing parties -- IPCL and IOC -- on August 1, is expected to refer the matter back to the Cabinet Committee on Disinvestment (CCD) in the coming days as an unresolved matter.

While there was some giving of way by IOC, which agreed to raise the offer price for the Vadodara unit from Rs 350 crore to Rs 730 crore, there was still a long way to go from the IPCL's valuation of about Rs 1,300 crore.

``IOC did not seem much interested in making a serious offer. Now that it is clear that no deal is deemed reasonably possible, the entire matter would be reverted to the CCD. The latter has already made provision that in case of the dispute remaining unr esolved, the IPCL would once again be put up for disinvestment -- this time as a whole company. To that extent, it would mean going through the entire process that started some 30 months ago all over again'', the Ministry official told Business Line.

Though both the PSUs followed the discounted cash-flow method for calculating the net asset value of the IPCL plant, the IOC had a long list of value depleters.

This included Rs 197 crore as the termination value for the Dahej-Vadodara pipeline put up by Dodsal on a BOOT basis, Rs 97 crore as the cost of cryogenic and other tanks put up by the Gujarat Chemical Port Terminal Company Ltd (GCPTCL) specially for the Vadodara complex, Rs 61 crore earmarked as contingent liability in IPCL balance sheet and some Rs 50 crore in the form of the pending wage settlement bill.

The decision to hive off the Vadodara plant of IPCL with the existing manpower on an `assessed value basis' to IOC was taken by the Cabinet Committee on Disinvestment (CCD) on November 18, 2000.

The CCD decision had derailed the original disinvestment plans for IPCL which began in early '99 wherein two bidders were shortlisted for 25 per cent stake with management control of the petrochemicals company.