Should 100% foreign direct investment (FDI) in a government-owned refinery be allowed?
While the Narendra Modi – led central government has recently called for inter-ministerial views on this proposal, most possibly against the background of facilitating the privatisation of country’s second biggest oil refinery Bharat Petroleum Corporation Limited (BPCL), trade union representatives remain wary of the pitch to allow complete ownership of government-owned refineries by foreign players.
The infiltration by a private oil and gas giant will bear severe economic repercussions on the nation’s energy security, trade unionists claim, making a case against the privatisation of the government-owned refinery. The challenges to safeguard domestic population’s interests will only “increase” by the accentuated influence of foreign players, they add.
Meanwhile, the Union Ministry of Commerce and Industry is considering to tweak FDI policy to allow up to 100% foreign investment under automatic route in public enterprises in oil and gas sector, which have an ‘in-principle’ approval for disinvestment, as reported by PTI on June 20. A draft cabinet note, carrying this proposal, has been floated to seek inter ministerial views, the report quoted sources as saying.
At present, 49% FDI is permitted through automatic route in petroleum refining by the public sector undertakings (PSU), without any disinvestment or dilution of domestic equity in the existing PSUs.
Also read: BPCL Management to Offer Shares Through ESPS to Employees who Supported Privatisation Drive
The decision to privatise BPCL that involves selling off of the Centre’s entire 53.29% stake in the oil refinery was cleared by the Union Cabinet in November 2019. However, no major progress could be achieved since then in this direction due to the pandemic-induced economic challenges and the opposition by the employees in the oil sector.
Terming the decision to sell off the country’s ‘jewel’ as “suicidal,” employees of BPCL, accompanied by those in other government-owned oil and gas companies, staged a one-day strike in the same month in 2019. Likewise, more recently in September last year, over 4,800 BPCL employees went on strike to record their opposition to the privatisation push.
Only three bidders had responded to the call for expressions of interest (EoI) for BPCL, that includes mining-to-oil conglomerate Vedanta and two private equity firms.
The Centre is now looking to complete the disinvestment exercise in this fiscal, while reportedly expecting to finalise the draft share-purchase agreement by late July-early August.
Swadesh Dev Roye of the Petroleum and Gas Workers’ Federation of India (PGWFI) flayed the Centre for being “desperate” to hand-over BPCL to the hands of private players. The latest proposal to allow 100% FDI must be viewed in this light, he added.
“The Modi government has already shown that it will go to any lengths to facilitate the privatisation of BPCL. In this light, talks of a distressed sale are also making rounds. The proposal to allow complete ownership to foreign players and thereby, inviting them to participate in the privatisation process is yet another attempt in this direction,” he told NewsClick on Monday.
Roye, who is also the secretary of the Centre of Indian Trade Unions (CITU), maintained that the privatisation of BPCL will lead the country’s energy security, “to be under the grip of private giants”. “The challenges will only increase, as time will tell, with the presence of a foreign player,” he added.
“The slogan of the Narendra Modi government is to achieve Atmanirbhar Bharat (self-reliant India), yet at the same time, it is allowing the foreign players to take charge of BPCL. This is a threat for the nation and must be protested,” Aji MG, general secretary of the Cochin Refinery Workers’ Association (CRWA), said.
He also questioned whether the private firms – more so a foreign one – will be interested in continuing with the “strategic investments” that BPCL has been making in other sectors with an aim to develop them.
Alok Kumar Roy, president of the National Confederation of Officers Association (NCOA), however, argued that FDI brings in technological advancement to the nation but added that it is another matter. “We are not in favour of the privatisation of PSUs,” he said.
Also read: Over 4,800 BPCL Employees on 48-hour Strike Against Govt’s Privatisation Drive
Noted economist Prabhat Patnaik had earlier argued against FDI in a sector producing a mineral resource, arguing that extraction of all exhaustible resources must be within the public sector. “Precisely because these resources are exhaustible, not only is there a question of ensuring an optimum rate of extraction of such resources, but every ounce of such resources, or the money obtained against the sale of such resources, must be used for purposes which are considered socially desirable. This requires social control over these resources, a necessary condition for which is keeping them within the public sector,” he wrote.
Earlier this month, All India Co-ordination Committee of Public Sector Trade Unions in their meeting, also gave a call to adopt “concrete organisational tasks,” to launch “slow but steady and long drawn,” resistance struggle in the petroleum sector against the Modi government’s policy decisions.
With over 15,000 petrol pumps and nearly 6,000 LPG distributors, BPCL has a 24% market share in the petroleum products marketing in the country. In addition to this vast network, three out of four refineries of the oil company will also be handed over to the private bidder as part of the disinvestment process.