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Reliance on the prowl…

May 31, 2000

The one truly Indian tiger Reliance is on the hunt to acquire the stand-alone petro-products marketing company, Indo Burmah Petroleum (IBP). This is mainly for strategic marketing reasons. Currently, the Government holds 59.6% stake in IBP’s equity capital. The disinvestment commission has recommended that the Government reduce its stake to 26%, the balance to be divested in favour of a strategic partner. This line of thinking has been corroborated by the Nitish Sengupta committee set up to assess the future scenario for stand alone refineries and marketing companies. The committee however has recommended divestment of Government stake in IBP in favour of Bharat Petroleum (BPCL).

Under the current scenario, prior to April 2002, 50% of the output of Reliance Petroleum (RPL) has to be marketed by Indian Oil Corporation (IOC) and the remaining 50% by BPCL and Hindustan Petroleum (HPCL) equally. Post 2002 with expected deregulation in the oil & gas industry, 50% of the output of RPL will have to be marketed by IOC and for the remaining 48%, RPL and IOC have formed a JV. For this remaining 48% it will probably be most uncomplicated to have products marketed through an independent delivery channel. This where IBP fits in.

IBP will give Reliance access to 1,500 retail outlets (petrol pumps) for petroleum products, 375 kerosene dealerships and 6 LPG distributors. The Reliance offer is an indication to the Government about the interest of the private sector in its assets. The Government should take maximum advantage of this interest and divest at the opportune time at attractive prices, instead of delaying the decision resulting in lower realisations for its assets as in the case of Videsh Sanchar Nigam Ltd (VSNL).

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