Sacrificing dividends

The Modi Government's decision on the privatisation of the public sector oil company BPCL is going to be a major economic disaster for India, making the country poorer by lakhs of crores by handing over this blue-chip company to the private sector.

Top officials of the oil sector including the BPCL, who have studied the finances of the company are aghast at the decision of the Modi government since BPCL — the second-biggest oil firm of the country — is like a goose laying golden eggs and the company has big prospects for expansion in the public sector. Now, if the PSU is sold to the private sector, the precious assets which belong to the country will be gobbled by the private company at a little price and the final loss to the economy will be huge.

According to calculations made by the officers' unions of the leading oil PSUs, the total assets of BPCL are valued at around Rs 9 lakh crore while the market cap of the BPCL was around Rs one lakh crore this week. Even taking into account the government formula on premium, the loss to the economy will be huge — more than Rs 4.5 lakh crore.

Earlier, the NDA government led by Vajpayee handed over the public sector VSNL to the Tatas at a very low price and there was severe criticism at that time about the decision since the new owner got huge assets as a result of the privatisation. The same thing is being repeated in the case of BPCL should the privatisation takes place.

The experts point out that the latest decision on revamping of the MTNL and BSNL and the trimming of the huge workforce through VRS is also a part of plan to hand over the revamped telecom unit to the private sector at a later date since the private owners are reluctant to take over both the PSU units at the present stage with such big workforce. This simply means that the private sector will reap future benefits at the cost of government expenses.

The Union Cabinet had last month approved the sale of government's entire 53.29 per cent stake in BPCL, arguing the resources unlocked by the strategic disinvestment would be used to finance social sector programmes benefiting the public.

BPCL was created by nationalising Burmah Shell after the private firms refused to cooperate in the national duties during the 1971 war, PSU leaders said. "The proposed privatisation would be no less than taking about-turn from the compulsion cited for effecting nationalisation."

BPCL is a Maharatna company and part of the Fortune 500 list of companies for 15 years. It has sound finances, efficient management, second-largest fuel retailer, pays more than Rs 17,000 crore as dividend to the Central government. It has 6,000 acres of land across India, of which 750 acres are in Mumbai alone which is valued for crores of rupees.

Oil sector experts mention privatising BPCL would dent the government's social commitment as the new owner is not likely to follow the policy of providing reservation to SC/ST, OBCs and economically weaker classes as also no service at remote and not-so-profitable areas.

The goose that lays golden eggs is being killed to meet the government's fiscal deficit target. "This is anti-people and biggest wealth destroyer step," one leading oil PSU union leader said.

Citing past privatisation moves where the new buyer asset-stripped companies they acquired, sources said the government should empower the PSUs and give them level playing field to compete with the private sector. The Modi government is not doing this. As a result, even the blue-chip PSUs are suffering and the ground is being prepared for privatisation.

Views expressed are strictly personal