Bharat Petroleum Privatization Won’t Happen In 2021: LIC, PSU Banks Privatization Delays BPCL Privatization

In an article dated July 20, 2021, Trak.in covered the possibility of privatisation process of two public sector banks and one general insurance company scheduled for the current fiscal, to shift to the upcoming one, that is financial year 2022-2023.

The privatisation process will be a part of the government’s disinvestment drive of Rs 1.75 lakh crore.

As a part of the disinvestment drive, the government plans to divest 100% of its stake in the state owned oil refiner, Bharat Petroleum Corporation Limited (BPCL). Approved by the Cabinet on November  20, 2019, the stake sale process was scheduled for the financial year 2021-2022.

However, due to the onset of the Covid-19 pandemic, all the preparations related to conducting the initial public offering (IPO) of national insurer LIC have decelerated.

This has in turn slowed down the privatisation process of Bharat Petroleum, in which the government holds a 52.98% stake. Sources have informed that the stake sale process will possibly shift to early 2022 and not take place as decided earlier, in 2021.

BPCL Disinvestment Process to be Shifted to FY23

The state-owned BPCL is the country’s third-biggest oil refiner and second-largest fuel retailer. The Union Cabinet approved the government’s plan of selling all of their 52.98% stake in the company to private players, in November 2019.

Around the time of proposal, the government’s stake in BPCL was worth about Rs 60,000 crore. 

The stake sale process was scheduled for FY22 but due to the slowdown in the preparatory processes of the much-awaited LIC IPO (due to the pandemic), the process for BPCL is most likely to be shifted to the upcoming financial year 2022-2023.

The IPO of LIC is anticipated to be among the biggest contributors to the budgeted disinvestment target of this fiscal. LIC is believed to be worth Rs 8-11.5 lakh crore, meaning a 10% IPO could fetch the government Rs 80,000-110,000 crore.

Sources have also confirmed that while the stake sale discussions of BPCL with the potential buyers have slowed down, the divestment idea has not been dropped. Three private players are reportedly showing interest in the BPCL disinvestment, one of which is Vedanta.

Privatisation of Financial Firms & General Insurer Delayed Too

The strategic sale of BPCL possibly shifted to next year is not the only privatisation process which has been pushed to the upcoming fiscal.

Finance Minister Nirmala Sitharaman’s announcement in the Union Budget meet on February 1, of privatising two public sector banks, besides IDBI Bank, along with one general insurance company in the financial year FY22 (2021-2022), too does not appear to be occurring this year.

The three privatisation deals are unlikely to be conducted in the current fiscal. It appears to be pushed to the financial year 2022-2023.

According to an official known to the matter, framing the contours of the deal and finding a suitable buyer will take time, adding to the finance minister’s promise of no employees losing their jobs in these holdings due to the privatisation process.

The government is taking its time to find the most suitable fit buyers for privatising the three entities. This is done to ensure no downsizing of the two public bank lenders, post privatisation.