Govt puts BPCL divestment on hold. All you want to know

In a major reversal that could have significant repercussions on India’s divestment plans, the government on Thursday said that plans to sell oil marketing company Bharat Petroleum Corp Ltd (BPCL) have been put on hold. 

Oil minister Hardeep Singh Puri told The Economic Times that the divestment of BPCL is not on the cards, as of now. 

The Centre earlier in August told Parliament that it will decide on re-initiating the process of BPCL strategic sale based on a review of the situation in due course.

So, why has the government made an about-turn on BPCL’s divestment?

The ET report cited junior finance minister Bhagwat Kishanrao Karad as saying that the pandemic, energy transition issues and geopolitical conditions affected several industries globally, particularly the oil and gas industry.

"A majority of Qualified Interested Parties have expressed inability to continue in the current process of disinvestment of BPCL," Karad said.

But was this announcement totally unexpected?

Well, not really, as signs that BPCL’s divestment could be put on hold were visible as early as May this year. The government in May formally withdrew its offer to sell its entire 52.98% stake in BPCL, saying majority of bidders have expressed their inability to participate in the current privatisation process due to prevailing conditions in the global energy market.

The privatisation was stalled after two out of three bidders walked out over issues like lack of clarity in fuel pricing. 

So, who all had expressed interest in buying BPCL?

Mining mogul Anil Agarwal's Vedanta, US venture funds Apollo Global Management Inc and I Squared Capital Advisors had expressed interest.

Are there external factors that have also influenced this decision?

Yes. The ongoing war in Ukraine has exacerbated the geopolitical complications. Both the countries involved in the war, Ukraine and Russia, are major suppliers of oil and natural gas to countries across the world. 

Brent crude prices have shot up from $70 per barrel in November 2021 to $94 per barrel in October 2022. They have stayed above the $100-mark for a considerable part of 2022.