No doubt the compulsions of coalition politics (the Bharatiya Janata Party heads an 18-party coalition), internal divisions within the ruling party, and a series of recent defeats in state-level elections played a role. Several state assembly elections are scheduled for next year, and coalition partners are wary of disinvestment fallout.

The orchestrated about-face has put a question mark on the immediate future of these prized majors that together account for 40 percent of the gasoline retail business and 30 percent of the lube market.

That Naik and Shourie did not see eye-to-eye on oil sector disinvestment was an open secret. In February amid much fanfare the government had announced its plans to divest its controlling stakes in HPC and BPC. Indian Oil Corp. had acquired the controlling stake in Indo Burma Petroleum (both state-owned corporations) over bids of companies like Shell and Reliance. Consequently, Indian Oil was barred from bidding for the two much juicier plums, HPC and BPC.

April ushered in petroleum sector deregulation, and several multinational corporations, including British Petroleum, Shell, ChevronTexaco, Petronas, Phillips and India’s major private player Reliance, evinced keen interest in the HPC-BPC sell-off.

The stock market surged, and state run corporations increased their wealth on the bourses by a staggering Rupees 600 billion (U.S. $12.4 billion). The deferment twist has proved a great dampener, and prices have nose-dived, leading to heavy losses for disappointed mutual funds and individual investors.

At the close of business on Monday, Sept. 9, HPC stock crashed 26 percent and BPC 20 percent; state-run corporations lost Rs. 85 billion (U.S. $1.75 billion) in market capitalization in a single day as investors dumped shares.

The Naik-Shourie shadowboxing centered around two main issues. First, Naik wished that state-run giants Oil and Natural Gas Commission, Gas Authority of India Ltd. and Indian Oil Corp. be part of the bidding process; Shourie disagreed. Secondly, Naik advocated off-loading shares in the market directly, whereas Shourie preferred the strategic sale route.

In addition, Naik raised the issue of two planned refineries (BPC’s at Bina and HPC’s at Bhatinda), whereas Shourie maintained that the new owner could not be compelled to establish new refineries when India already had excess refining capacity.

Some analysts believe that privatization is merely postponed and fresh plans will be announced once the dust settles. Political bargaining and wrangling is viewed as an inevitable hazard; it need not hijack the privatization process. Others fear that the stock price will not surge again, and the government may realize a reduced price.

A small minority feels the privatization in the oil sector might itself be shelved for good. Interestingly multinational players are said to be not overly perturbed at the temporary setback. The privatization path is known for its hiccups and setbacks.

The BPC-HPC strategic sale was slated to rake in Rs. 300 billion (U.S. $6.2 billion). Of the government’s target of garnering a minimum of Rs. 125 billion through disinvestment during the current financial year, a mere Rs. 30 billion is in the kitty.

Though both HPC and BPC are geared to survive in a changed competitive market, uncertainties of future ownership and governmental vacillation have dealt a blow to employee morale. Clearly, the next few months will witness hectic behind-the-scenes power play.