BPCL Oil company which is a PSU has been cleared the way for privatization by BJP government. It is a highly profitable company and important for national energy security. The Oil marketing and refining industry is capital intensive and is in a oligopoly. The company has a strong brand value. The land banks available with such PSUs is huge. If government sells its share in the company, it should do so for atleast 70-75k crores.
Some are saying as a rule, the govt should not do business! Any business that the govt does or controls will die, without an exception. Due to lack of responsibility for public property, and lack of checks and balances. Govt of India should dump all PSUs immediately and rid elements of socialism. PSUs are a burden in Indian tax payer, working inefficiency and never reaching their full potential under the management of people who have no stake in the losses but only in the profits.
But the majority say, It is fashionable to say government should not be in business these days but you forget your own history. Read about why oil companies were nationalized in 1976. When companies in your own country do not support you in war, do not employ Indians, make the highest profit by selling end products, one can only say the government took a great decision by getting rid of these foreign mncs. The government created enormous wealth, enjoyed very good dividends while not compromising with the energy security of the country. Whenever the oil price goes high, the Oil PSUs still subsidize their products. Obviously they are not a burden to the tax payer. ONGC is the highest tax paying company in India. It paid 13,000 cr tax, 5000 cr dividends last year.
BPCL and Oil exploration
No MNC was interested in oil exploration in India in 1950s. They actually thought no oil and has could be found in India. The government formed a commission to explore oil and gas in India. The commission discovered Bombay High in 1970s. If you know how big a discovery is Bombay high, you would know what ONGC achieved and what your private companies could not.
The government keeps selling profit making companies and ends up holding Air India, BSNL, MTNL etc.
Whosoever buys BPCL would make a big fortune. I heard Saudi Aramco, Adnoc and Shell are in the race to buy BPCL. Actually selling BPCL doesn’t make sense in the business point of view. India is a growing market and BPCL is trying to enter into LNG business as well. A better solution would have been to bring the government share below 50% and give a free hand to company management in terms of business strategy and recruitment. That would have been called a bold move.
That’s what they did with hindustan zinc and private management turned it from loss making company to one of the world’s most efficient producers of zinc.
But keeping stake in bpcl would have raised lesser amount of money. I think government is going to keep some amount of stake. News articles are using the phrase ‘most of the stake’and not ‘all of the stake.’
Hindustan Zinc, controlling stake was given to the Vedanta group. It need not necessarily be that way. The government can keep the controlling stake but shouldn’t interfere in the business strategy. Many a times PSUs take decisions to please the government or for the political benefit of the party heading the govt. Moreover, PSUs are the only companies implementing the reservation policy. So, Govt can remove such restrictions and give management freedom. Govt can then get good profit out of PSUs.