Private Firms Can Now Buy 100% Of Bharat Petroleum & Other Govt Oil Firms As Rules Changed

The government will now allow 100% foreign investment in oil and gas PSUs under the automatic route.

Expanded Scope

This applies to oil and gas PSUs which have received in-principle approval for strategic disinvestment.

This will help move along the process of privatisation of India’s second biggest oil refiner Bharat Petroleum Corp Ltd (BPCL).

It will also expand the scope of FDI in other public sector companies in the oil sector put up for privatisation.

Reason Behind FDI Regime Change

The government will sell the entirety of its 52.98% stake in BPCL.

The Department for Promotion of Industry and Internal Trade (DPIIT) said that up to 100% FDI will be allowed for petroleum refiners, and in those without any disinvestment or dilution of domestic equity in the existing PSUs, the limit remains at 49%.

The government had raised the FDI limit in oil refineries promoted by public sector companies  from 26% to 49% back in March 2008.

The change in FDI limit was the need of the hour since most bidders who had shown interest in BPCL have foreign investment.

What The Takeover Policy Entails

The policy is applicable to :

• Exploration activities of oil and natural gas fields
• Infrastructure related to marketing of petroleum products and natural gas
• Marketing of natural gas and petroleum products
• Petroleum product pipelines
• Natural gas/pipelines
• LNG Regasification infrastructure
• Market study and formulation 
• Petroleum refining in the private sector

The decision to go ahead with the move was taken by the Union Cabinet last week.

2 out of 3 companies which had expressed interest in buying out the 52.98% stake are foreign entities.

Whoever ends up acquiring the stake will also have to make an offer to buy an additional 26% stake from other stakeholders at the same price.

This is in accordance with takeover rules.

Other Major Oil PSUs

For now, the government is selling stake in only BPCL. 

India’s largest oil refining and marketing company Indian Oil Corporation (IOC) is the only other which is under direct government control.

Hindustan Petroleum Corporation Ltd (HPCL) is now a subsidiary of state-owned Oil and Natural Gas Corporation (ONGC).

Top Bidders

Presently, mining-to-oil conglomerate Vedanta and US-based private equity firms Apollo Global and I Squared Capital’s arm Think Gas are the major contenders to buy the government’s stake in BPCL.

Billionaire Anil Agarwal’s Vedanta has formed a special purpose vehicle with its London-based parent Vedanta Resources to further its bid. 

Private Firms Can Buy 100% Of BPCL, PSU Oil Firms: 100% FDI Allowed In PSU Oil Companies