Bharat Petroleum Privatization: 100% Private FDI In Govt Oil Firms Allowed; What Does This Mean?

The government has no business in being in business, our Prime Minister Mr. Narendra Modi has asserted many a time. And the government has been making a consistent effort to walk the talk. With the current developments in this direction, they are making their intentions very much clear.

Government eases FDI rules to aid privatization of BPCL

Currently, foreign institutions can make up to 100% of investments in India through Automatic Route, Government Route, and Automatic+Government Route. Some sectors have been given free hands whereas some require more government scrutiny. And so is the case of Indian state-run Oil and Gas companies. Currently, only 49% of Foreign Direct Investment is allowed in them.

But as the government is marching ahead with the motto of either modernize or monetize, this rule was proving to be an impediment on that path. Hence to make the path clear for monetizing from PSUs in Oil and Gas segment, the government has made amendments to the existing rules.

On Thursday, India’s federal government allowed 100% Foreign Direct Investment in Bharat Petroleum Corporation Limited. One of the sources affirmed, “Foreign investment up to 100% under automatic route is allowed in cases where the government has accorded in-principle approval for strategic disinvestment of the PSU (public sector undertaking) engaged in petroleum and natural gas sector.

Milking the cow while it is minting money

The government currently owns approximately 53% shares in BPCL.

The company posted a net profit of Rs. 11,940 Crore in the financial year ended in March 2021. This has been quite a turnaround from the net loss of Rs. 1,316 Crore a year ago.

So now that company has been proved as a massive profit-making company, the government doesn’t want to lose this opportunity. Hence the effort to make amendments to the rules. Through proposed divestment in various companies, the government is aiming to raise Rs. 1.75 Trillion in Financial Year 2022.