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Bidding for IBP restricted only to Reliance and MRPL - Views on News from Equitymaster
 
 
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  • Jan 5, 2000

    Bidding for IBP restricted only to Reliance and MRPL

    The government has taken a view that only the private sector and the joint sector refiners can participate in the bidding process for the Indo Burma Petroleum (IBP).

    This will confine the contenders for IBP to Reliance Petroleum and Mangalore Refineries and Petrochemicals (MRPL). The government apparently has given the argument that these companies have invested substantial amounts in their refining projects and logically need marketing support.

    Reliance Petroleum (RPL) has recently commissioned a 27 million tonnes refinery at Jamnagar and plans to build a product pipeline from Jamnagar to Gwalior. MRPL is a joint venture between the A.V. Birla group and Hindustan Petroleum, each holding a 26% stake in the company. The refinery has a capacity of nine million tonnes.

    Consequently, Indian Oil Corporation (IOC), Bharat Petroleum (BPCL) and Hindustan Petroleum (HPCL) have been left out of the bidding process. This would be the second flip flop on the oil PSUs divestment policy.

    The government first appointed the Nitish Sengupta committee, which recommended the sale of the government’s stake in IBP to BPCL. The government rejected the committee’s recommendation on the ground that a process of open bidding would yield a better price for the government stake. Now the government on its own is restricting the bidding to only two contenders forgetting the reasons on which it justified the rejection of the Sengupta committee recommendations. It is quite possible that there could another change in the divestment norms soon.

    The importance of IBP to both MRPL and RPL cannot be over emphasised. Both are keen on establishing a retail network of their own. And IBP with 1500 retail outlets could provide the perfect start. At present, HPCL does the marketing for MRPL while IOC, BPCL and HPCL have agreed to lift the output from RPL’s refinery.

     

     

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