In 2014, Narendra Modi famously said something along the lines of, “Chay bechi hai, par desh nahi bechunga” (I have sold tea in the past, I won’t sell my country). As we fast forward five years, it seems like he has gone back on his words. The Indian government has decided to sell its stock in Public-Sector Undertakings (PSUs) to relieve their cash strain. The elephant in the room now is: why did the government have to sell profitable PSUs at sub-par prices?
The one company that I speak of, in particular, is the Bharat Petroleum Company Limited (BPCL).
Crunch these numbers for me please: BPCL has 14,800 petrol pumps, four refineries (in Mumbai, Kochi, Bina and Numaligarh), 123 petrol depot and 52 LPG plants. It made a consolidated profit of ₹8,527.85 crores in the year ending on 31.03.2019, as per the BPCL Annual Report 2018-2019, and had a refinery thoroughout of 36.76 million metric tonnes as of 31.03.2019, with a 4% sales growth. Besides having 5907 LPG distributors and 56 aviation service stations, it currently operates in 7 countries and has eight subsidiaries. Market sales were 43.07 million metric tonnes, with increases in motor spirit – retail (6.44%), high-speed diesel – retail (1.43%), liquified petroleum gas (8.44%) and aviation turbine fuel (11.13%), as of 31.03.2019.
And yet the government is ready to sell it for 68,000 crores, which many say is quite an undervaluation!
The Department of Investment and Public Asset Management (DIPAM) – Ministry of Finance, Government of India, has begun seeking proposals from eligible parties to work as legal and transaction advisors, and asset valuers for BPCL and four other PSUs. The government seems to be in a hurry to get it off its shoulder!
The company is India’s second-largest downstream oil company. With 12,865 employees, the company is currently ranked 275th on the Fortune list of the world’s biggest corporations. The company was formed when Burmah-Shell Oil Storage and Distributing Company of India Limited, established in 1928. It was first nationalised under the Nationalisation of Foreign Oil Companies Act in 1976 and subsequently taken over by the Government of India as Bharat Petroleum Corporation Limited (BPCL).
The government has highlighted that this sale can help alleviate the problems related to the present economic crisis. This is not the first time that a BJP government has attempted this. Back in 2003, the Atal Bihari Vajpayee government had attempted to privatise the company, albeit unsuccessfully, since a petition by the Centre for Public Interest Litigation made the Supreme Court hold back such a move, without the assent of the parliament. The BJP-led NDA government did not have the numbers to do this then. Now it does, and it has. In October 2019, using the Repealing and Amending Act of 2016, the government annulled the Act of 1976 that had nationalised BPCL and thereby removed the need for a nod from the parliament for selling its stake. Now the government has approved a strategic divestment of the government’s 53.29% stake in the company, along with the transfer of certain management control. This does not include BPCL’s equity shareholding of 61% stake in Numaligarh Refinery. This is in line with the government’s ambitious disinvestment target of ₹1.05 lakh crore in FY20.
The Indian economy currently is in quite a crisis. Growth projections are dismal, and there are worrying signs creeping into the scene. However, the move to divest from BPCL may not be the best to change this grim situation. What may be required right now is a push for building infrastructure, and increasing public investments, along with increasing the purchasing power of the people and generating jobs. The government, instead, seems to be seeking to sell one of its prime assets, its crown jewel, so to speak, to private companies and corporates. India is still a developing country and self-reliance is an important aspect that needs to be safeguarded as we grow.
We need a robust industrial base, a balanced growth that caters to the regional needs and interests of the people and promoting economic independence and economic democracy. We need energy security, sustainable growth and subsidised products that are affordable for, and accessible to, people. We also need job security and welfare for the workers working in these companies.
Instead, we may see a decline in economic sovereignty for the interests of international finance capital and speculative profit. We may see the exploitation of workers, for foreign and possibly even imperialist interests. The last time BPCL and the Indian oil was privatised, there was a certain reluctance to supply oil at the frontiers in the 1971 Indo-Pakistan War, thereby going on to show how this could be a challenge to national interests, in general, as well. That reluctance triggered the move to nationalise the industry back then.
We all know how oil and energy have been the basis for various neo-colonial designs, conflict and disturbances. The United States of America has found in oil the perennial jump starter for ‘humanitarian interventions’ and ‘wars on terror’. Leaving aside the very visible risk economically, I hope this does not affect our country politically and socially moving forward. I realise that India is much more robust and resilient, and has a certain standing internationally today. It is not the India of the eighteenth century, fractured and divided, that led to a certain East India Company go from trading to ruling the country. Yet, it is an India where vested interests and profiteering can eat away at the access to capital, resources and services that every citizen deserves, in the country.
The move to privatise the PSUs can have serious repercussions. Firstly, surrendering fuel pricing to private players can be risky. At the moment, 75% of the country’s fuel marketing business is owned by BPCL, HPCL and IOCL. With the announced move, two of the three will become privatised. The government currently plays an important role in absorbing any inflationary perturbations and shocks in the industry, but with the widespread privatisation, this may not be possible, and prices of petroleum products may skyrocket. Secondly, there are a number of sectors that rely on petroleum and petroleum-based products, such as aviation and railways. If there are any hikes or market perturbations in the oil and petroleum industry, the effects will be felt in other sectors too. Lastly, the current move may lead to widespread layoffs and a negative effect on worker rights and welfare. This may be especially true for foreign companies who may use this opportunity just to get a space in the Indian market, rather than being interested in increasing productivity, or necessarily maintaining the current profile of the company, thereby possibly leading to loss of jobs. This is especially true in refineries, where multiple units may be closed or streamlined to a lesser number of units, by the buyer(s) of the government’s stake. This will also invariably hit the reservation policy and rights of women, SC/ST/OBC and other marginalised groups, since they may not be as robust and organised by a private company.
To stand up against this move and due to the aforementioned points of concern, a National Convention of Oil & Petroleum Workers was held recently, on 26 October 2019, in Mumbai, with around 350 workers representatives from oil PSUs from across the country participating. It was jointly organised by the various Trade Unions operating in BPCL, HPCL, ONGC, IOC and OIL. A call was taken to fight against this move to brazenly privatise a major player in the domestic industry. The Declaration of the Convention noted that in the past, the government would resort to showcasing why a PSU is underperforming or failing to justify divestment of equity of such PSUs. It went on to highlight that the recent move to divest from a successful PSU such as BPCL was shocking and showed that the Central Government of the day was in the hands of a few crony capitalists. I may not personally go that far in my condemnation, but this move definitely is very troubling. The Convention resolved that all refineries, marketing and pipeline workers of BPCL and HPCL at all workplaces in the country shall strike from 6 AM on 28 November 2019 to 6 AM on 29 November 2019.
This is not only about a company or (a fair few) jobs. It is about social justice! This has to become a movement for positive change and a call to stand up against brazen privatisation of even one of the most profitable Public Sector Undertaking (PSU), a crown jewel of contemporary India!