NEW DELHI: The government will encourage ONGC, which acquired state-run HPCL at a huge cost of Rs 36,915 crore in a bid to help the government fulfil its disinvestment target, to sell the auto-fuels refiner and marketer in order to pare debt.
A day after the Cabinet decided to sell off the government’s entire stake in BPCL, officials said “ONGC will be encouraged to sell off HPCL or part of the firm if it so wants. However, that will be its own decision.”
The buyout in January 2018 had turned ONGC, a zero-debt company, into one with a debt load of Rs 21,593 crore by the end of 2018-19.
Interest payments also zoomed from Rs 2.79 crore in 2015 to Rs 2,492 crore as on March 31, 2019, or 893 times!
Both HPCL, which was earlier part of the US-based Esso conglomerate, and BPCL, which was Burmah-Shell, a British oil retailer, were nationalised in the 1970s and turned into state-run firms.
In 2003, the central government under Prime Minister Atal Behari Vajpayee was restrained by the Supreme Court from privatising these firms as they had been nationalised by an Act of Parliament and could be de-nationalised only by an Act of Parliament.
Officials said the government had now repealed those acts and there were no barriers to selling either of the two oil-refiners-cum-marketers.
Since the gunshot wedding, officials said there had been an uncomfortable attempt to build synergies which the personnel of both PSUs had resented.
“Frankly, ONGC is an oil explorer. While downstream refineries can still be a part of its portfolio, to ask it to manage a oil retailing business is akin to asking a research lab to also sell detergent,” said a director of HPCL.
HPCL recorded gross sales of Rs 2,95,713 crore in 2018-19 and net profits of Rs 6,029 crore.
HPCL, which runs three major refineries in the country, is currently modernising its Visakhapatnam refinery in Andhra Pradesh at an estimated cost of Rs 20,928 crore.
Once completed, this project will increase the firm’s refining capacity from the current 8.33 million metric tonnes per annum (MMTPA) to 15 MMTPA.