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| Oil sell-offs: Running out
of gas |
On paper, it's just a technicality. But
in effect, it could sound the death knell for disinvestment in the
country. On September 16, 2003, a two-member bench of the Supreme
Court delivered a 21-page verdict directing the government to seek
parliamentary approval before disinvesting its stakes in oil companies
HPCL and BPCL. The judgement, delivered in response to a public
interest litigation filed by the Centre for Public Interest Litigation
and Oil Sector Officers Association for stalling the sale of the
two companies, cited Section 7 of the Esso (Acquisition of Undertaking
in India) Act 1974 and similar sections of the Acts of 1976 and
1977, under which the government acquired the assets of Esso Standard,
Burmah Shell, and Caltex. According to the relevant provisions,
the government can transfer the acquired oil undertakings only to
those entities where it has a minimum 51 per cent stake. Since disinvestment
transfers the ownership to a strategic partner (in the case of HPCL)
and the public (in the case of BPCL), a parliamentary amendment
to the acts would be needed for their sale.
The judgement has a far-reaching impact on the
whole process of disinvestment. On the one hand, the government
is now obliged to seek approval from both houses of the Parliament
for the sale of everything from its banks to coal companies, financial
institutions to insurance companies. On the other hand, the court
ruling could potentially call into question all the 47 PSUs sold
beginning 1991, including the sale of Maruti Udyog to Suzuki. All
it will take is another PIL. While a leading Delhi-based lawyer
is of the opinion that the court ruling is only prospective, disinvestment
minister Arun Shourie reads significantly more into it. He thinks
that not just outright sale but also ADRs and GDRs of PSU companies
will now be open to question. Says an investment banker: ''India's
privatisation process has just walked into a legal minefield.''
On December 3, 2003, the Disinvestment Ministry
is to place an "Options Paper" before the Cabinet Committee
for Disinvestment. Thereafter, the government will decide on a course
of action, key among which will be a Parliamentary amendment to
the Esso Act. The hitch: the opposition Congress has the majority
in Rajya Sabha, and should it decide to oppose the amendment, disinvestment
will come to an abrupt halt and with it the government's hopes of
raising Rs 13,200 crore from the process this year. At least until
December-and possibly for several months thereafter-all disinvestment,
HPCL and BPCL included, will hang in limbo.
-Sahad P.V
''Anything Is Possible In This
Country''
What
Arun Shourie has to say about the Supreme Court's order restraining
the disinvestment of HPCL and BPCL.
What was your first reaction?
I was a little surprised because we were not
expecting something like this. We had meticulously studied all the
legal implications regarding the disinvestment of HPCL and BPCL,
looked closely at the Banking Companies (Acquisition & Transfer
of Undertakings) Act as well as the Coal Mines Nationalisation Act.
We had also sought the advice of the Attorney-General, Soli Sorabjee
as well as the Law Ministry.
What does this mean for the Disinvestment
Ministry?
The order means a major setback for us. We have
immediately stopped all work including due diligence of these companies,
which was in an advanced stage. We have to see whether companies
like Shipping Corporation of India, Warehousing Corporation of India
can be sold because they too were created by an Act of Parliament.
Do you feel let-down?
Personally, I have become quite detached.
What next?
We will present a list of options open before
the Disinvestment Ministry for the privatisation of HPCL and BPCL
during the next meeting of the Cabinet Committee on Disinvestment
on October 3.
Won't this delay affect the valuations of
these oil majors?
Of course, yes. The delay in the disinvestment
of Videsh Sanchar Nigam Limited (VSNL) and Maruti Udyog Limited
(MUL) adversely affected their valuations. I see a similar trend
happening in the case of HPCL and BPCL.
Many experts believe that the disinvestment
of Maruti can be challenged because it was created by an enactment.
Anything is possible in this country. We can
only keep our fingers crossed.
(Shourie spoke to BT's Ashish
Gupta on September 18, 2003.)
"I
am Neither Happy Nor Sad''
What Ram Naik has to say about the Supreme Court's order restraining
the disinvestment of HPCL and BPCL.
What was your first reaction?
I am neither happy nor sad with the recent judgement of the Supreme
Court. I still believe that it is a historic judgement. It is true
that I had opposed the disinvestment of HPCL and BPCL, but once
the Cabinet took a decision to this effect on January 26, I have
never said a word until September 15. At least, you have to give
me credit for being bound by the decision of the Cabinet.
Do you still view oil as strategic industry, whose control
must always remain with the government?
No, the government is of the opinion that there are only three
strategic industries in the country today. These are defence, atomic
energy, and railways, not oil.
What next?
We have not concretised any plan yet.
Do you plan to effect an ordinance speeding up the disinvestment
of HPCL and BPCL?
There are no such plans.
Won't this affect the disinvestments of other oil PSUs?
There are really no PSUs up for disinvestment right now. We have
already made it clear that Indian Oil Corporation (IOC) in the refining
sector, the Oil and Natural Gas Corporation (ONGC) in the exploration
and production sector, and the Gas Authority of India (GAIL) in
gas sector are flagship companies where the government's equity
can never fall below 51 per cent.
-Ashish Gupta
Naidu's
Chequered Gambit
AP's dynamic CEO now wants an F1 race in Hyderabad.
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| CM #1: His
sights are set on F1 now |
Sachin Tendulkar
was gifted a Ferrari (yes, that Ferrari!) by F1 world champion Michael
Schumacher when he went to watch a Formula One race. All Andhra
Pradesh Chief Minister Chandrababu Naidu could manage was a handshake
(and a photo op) with Michael Schumacher's physio. Fine, Schumi's
physio is an Indian called Balbir Singh who traces his lineage to
somewhere in North India. That is India's sole connection to F1
right now. True, Narain Karthikeyan has made a beginning of sorts
by testing out a F1 car, but he is already 27 and the chances of
him becoming a true-blue F1 jock seem remote; the distinction of
being the first Indian to do so will probably belong to one of the
kids he's influenced the take up the sport.
Naidu believes that a cm should sell his state as a destination
for all kinds of things. First it was it; then it was BT (biotech,
not Business Today); still later, it was insurance. Now, the man's
overriding obsession is to put Hyderabad on the F1 circuit by 2006.
Here's what that will take.
The circuit: Building this will be the easy part. It will cost
Rs 500 crore to build and that magnitude of money is easily raised.
The audience: F1 has been losing fans over the years. The recent
Hungarian and German Grand Prixs witnessed stands that were half-empty.
Even the Malaysian GP, the race closest home and the one to which
hardcore Indian fans fly down every year, played out before sparse
stands. That may have been because it clashed with the final of
the Cricket World Cup, but fact is, in India, F1 has a following
restricted to a niche of a few thousand people. Given that F1 boss
Bernie Eccelstone divides the money from TV rights between his various
companies, the Federation International De L'Automobile (FIA) and
the teams, racetracks have to make money by filling up the stands.
The average grandstand seats 50,000.
The sponsors: F1 thrives on tobacco sponsorship; the Ferrari team,
for instance, is sponsored by Marlboro. Stringent tobacco sponsorship
laws have already scuttled the Canadian GP. China and Bahrain, which
will host F1 races in 2004, have no such laws. India, surprisingly,
was one of the first countries in the world to enact such a law.
Most teams have promised to find alternate sponsors by 2007, but
this is likely to be a promise that is stretched, if not altogether
broken. Naidu may usually get his way but it is unlikely that he
can get the Central Government to amend this law.
The infrastructure: F1 is not just about the circuit, it also
about the associated infrastructure. F1 teams usually move around
in five, six, even seven cargo 747s. With Hyderabad's Begumpet airport
bang in the middle of the city, there seems little chance of expanding
it. Of course, the city could get a new airport by 2006.
Lest we forget, F1's Tiger Woods, the man who has made the sport
popular, Schumi, retires in 2005. We'd really love F1 to come to
India, but Hyderabad? Give us a break!
-Kushan Mitra
PROFILING
The Anatomy Of Indian Investors
21 million: Number of investors
who invested in equity and debentures in 2000-01
5.5 million: The fall in the number
of households invested in equity from 1998-99 (12.1 million) to
2000-01 (6.6 million)
5.9 million: The increase in the
number of households invested in debentures from 1998-99 (3.7 million)
to 2000-01 (9.6 million)
4 million: The fall in the number of
investors invested in mutual funds from 1998-99 (23 million) to
19 million (2000-01)
45 per cent: Share of southern states
in number of total investor households
25 per cent: Share of Gujarat in
number of households investing in equity.
Source: Recent survey by SEBI-NCAER
-Roshni Jayakar
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