India mulls selling Bharat Petroleum Corporation Limited

India is planning to sell the government’s majority stake in Bharat Petroleum Corporation (BPCL), the country’s second-largest state-owned refiner, to an international oil company, Bloomberg reported last week. As India is currently assessing ways to give up direct majority control in BPCL, it is willing to attract international oil companies to its refining and fuel retail market that is dominated by local companies, Bloomberg’s sources said. 

The government is said to be keen to lure multinational companies in the domestic fuel retailing to boost competition and shake up a sector that’s long been dominated by state-run firms.

Saudi Aramco is targeting refining deals in India, while Russia’s Rosneft PJSC has already invested in oil refining and fuel marketing. Others such as Total SA, Shell and BP Plc are also expanding into fuel retailing in India. The International Energy Agency expects energy demand to more than double by 2040.

Bharat Petroleum was previously Burmah Shell, which in 1970s was nationalised by an act of parliament. Burmah Shell, set up in the 1920s, was an alliance between Royal Dutch Shell and Burmah Oil Co. and Asiatic Petroleum (India).

India’s government plans to sell its entire more than 50-percent stake in BPCL, Business Standard reported earlier this month. According to Business Standard, however, the most likely buyer would be state-controlled Indian Oil Corporation.

A possible merger between BPCL and IOCL would be the third major deal of combining state-held enterprises over the past three years, excluding mergers in the banking sector, Business Standard said.

If the deal succeeds, a BPCL and IOCL merger would follow the merger between the Oil and Natural Gas Corporation (ONGC) and Hindustan Petroleum Corporation (HPCL) in 2017-2018 and the REC-Power Finance Corporation (PFC) deal in 2018-2019. 

In its second term in office now, the Indian government of Prime Minister Narendra Modi is looking to book proceeds from divestments of stakes in state-held firms in order to curb budget deficit.

India’s government is considering relinquishing direct control over some of the biggest energy firms. The likely candidates for the government cutting its direct stake to below 51 percent could be Oil and Natural Gas Corp, Indian Oil Corp, NTPC Ltd, and GAIL India Ltd.

India’s Oil Minister Dharmendra Pradhan, however had said in July this year that there wasn’t any proposal for a merger of state-owned oil and gas firms currently under review at the ministry.  

Shekhar Ghosh is consulting editor, Indoasiancommodities.com. He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He can be reached at shekhar.ghosh@indoasiancommodities.in.

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