The Hindu : IOC takes control of IBP

Online edition of India's National Newspaper
Wednesday, Feb 20, 2002

Business

Business

IOC takes control of IBP

By Our Special Correspondent

NEW DELHI, FEB. 19. The Indian Oil Corporation's plea to be allowed to bid for disinvestment of Hindustan Petroleum Corporation and Bharat Petroleum Corporation will be decided by the Cabinet Committee on Disinvestment (CCD) after a review of the earlier decision.

This was disclosed here today by the Petroleum Minister, Ram Naik, on the sidelines of the function to hand over the management control of the public sector oil marketing company, IBP to the IOC. He said IOC is the "aggrieved party'' and has submitted a representation to the Petroleum Ministry and the Department of Disinvestment. The DoD would now take this issue for review to the CCD. He told reporters that the issue of monopoly control of the oil sector would also be taken up for consideration by the Cabinet Committee on Economic Affairs (CCEA).

Mr. Naik was speaking shortly after the IOC Chairman, M. A. Pathan, handed over a draft of Rs. 1,153.68 crores to acquire 33.58 per cent Government shareholding in IBP. This will enable the IOC, already the country's largest oil company, to take management control of IBP's 1,553 retail outlets, 376 kerosene dealerships and 17 LPG dealerships. Mr. Pathan will remain part-time chairman of the company which will now have a restructured board of directors.

Mr. Naik pointed out that the total outgo from IOC for the company would be Rs. 1,800 crores, taking into account another Rs. 688 crores for acquiring an additional 20 per cent equity stake. This meant the average cost of acquiring a retail outlet would be about Rs. 1.20 crores as against the cost of Rs. 3 to 4 crores for putting up a new outlet. Besides, he estimated that at the normal rate of increasing outlets by 300 every years, it would have taken five years to set up 1,500 outlets.

Mr. Naik took the opportunity to reiterate that despite "some doubting Thomases,'' the administered pricing mechanism for the petroleum sector would be dismantled and a new regime would be put in place by April 1 this year. This had renewed interest of multinationals and Indian investors in the petroleum sector as well as in the disinvestment process as a whole, he felt.

Replying to questions, Mr. Pathan agreed that the acquisition of IBP would add value to IOC but would not comment on the prospects of higher profitability on this account. As for expansion schemes, he said the Panipat refinery expansion scheme was being reworked in the light of the new Haryana Development Authority tax of 4 per cent which would mean an additional expenditure of Rs. 240 crores annually. Similarly, the Paradeep refinery expansion was being re-phased in view of the slow growth of petroleum products demand in the country.

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