The intriguing Hindustan Petroleum/Bharat Petroleum saga witnessed many a storm: parliamentary wrangling, media debate, inter-ministerial standoffs, a general strike, legal battles and postponements. Finally, in September 2003, even as due diligence was under way, a Supreme Court order created the biggest roadblock. The Court ruled that Parliament’s approval for repeal or amendment of the statute that created the two corporations was an essential prerequisite to any sale. As the then-government lacked the numbers in Parliament’s upper house, the Rajya Sabha, this order halted the privatization exercise for the two majors (who together command 40 percent of the fuel retail business and 30 percent of the lube retail business).

Bharat Petroleum was to have been disinvested through the public-issue route, with the government off-loading 32.2 percent of the company and retaining 33.8 percent.

In Hindustan Petroleum’s case, 34.1 percent of the company was proposed for off-loading to a strategic investor, leaving the government with only a 16.9 percent minority stake. It had the following suitors: Reliance, Saudi Aramco-Shell, Kuwait Petroleum and BP, all of which were unavailable for comment. Ashok Singh, president of the Oil Sector Officers’ Association, was more voluble: “This issue is now closed forever, not just for the next five years. We will perform in such a way that no future government will make any move to sell us off.”

Caltex, Indo Burma Petroleum, Hindustan Petroleum and Bharat Petroleum were bidders for Tide Water, a medium-size, seasoned lube player (market share 4 to 5 percent) always clocking healthy profits. There was reportedly some delay as Hindustan Petroleum and Bharat Petroleum requested more time to obtain official clearance from the Petroleum Ministry.

Balmer Lawrie, India’s oldest greasemaker, has interests in areas as diverse as lubricants, industrial packaging, containerization, project engineering and consultancy, travel tours and cargo, tea blending and exports. Reportedly, bids were in but matters hung in limbo.

Though no official pronouncements have been made regarding the fate of Tide Water and Balmer Lawrie, the general industry assessment is that in the current political climate any outright sale proposal of profitable concerns is highly controversial. Even by the end of 2003, in anticipation of the 2004 elections, the former government had virtually placed all ongoing disinvestment projects on ice. It chose instead to bridge the budget deficit by off-loading small equity chunks (10 percent each) of cash-rich upstream corporations like Oil and Natural Gas Corp. and Gas Authority of India Ltd. — mindfully keeping more than 51 percent and hence firm control of each.

Political opinion across the spectrum is cognizant of the popular distrust of the privatization process, now perceived as one of the causes of the former government’s drubbing at the polls last month. Over the years, sticky issues like selling off capital assets to meet short-term expenses, transparency, evaluation methods, valuation of free reserves, job security, etc., have been the subject of heated debate. That the Disinvestment Ministry itself stands disbanded is perhaps evidence of its unpopularity; the Disinvestment Department is presently an adjunct of the Finance Ministry.

Not only are profit-making PSUs to remain under government control, but as Prime Minister Dr. Manmohan Singh was at pains to underline, they will be “encouraged to grow and expand.”

For now, sale of equity up to 49 percent, with the government holding 51 percent controlling interest, may remain the only sop to disinvestment.