BPCL sets up platform for subsidised LPG

NEW DELHI: Divestment-bound Bharat Petroleum Corp. Ltd (BPCL) has created a separate platform for its liquified petroleum gas (LPG) business that runs the Union government’s subsidized domestic cooking gas cylinder scheme, two people aware of the development said, in an attempt to enable its buyer to “ring fence” and operate the marquee scheme.

According to the plan, the acquirer of the government’s entire 52.98% shareholding in BPCL will run the direct benefit transfer (DBT) scheme, also known as Pratyaksha Hastaantarit Laabh (PAHAL), to deliver cooking gas subsidies to beneficiaries’ bank accounts. A separate platform and mechanism has been developed by BPCL to run the scheme.

BPCL operates refineries in Mumbai, Kochi, Bina and Numaligarh, with a combined capacity of 38.3 million tonnes per annum.

A BPCL spokesperson declined comment.

“It’s been made clear that whoever will acquire BPCL will have to run the government’s LPG scheme, wherein the government will bear the subsidy burden. They will have to ring fence that business. Within the organization, they will have to keep it separate and a platform and mechanism has been developed for it by BPCL. It will run on it,” said a government official, one of the two persons cited above, requesting anonymity.

Besides Vedanta Group, two American funds—Apollo Global and I Squared Capital—have submitted their expressions of interest (EoI) for India’s second-largest fuel retailer.

The department of investment and public asset management (Dipam) is managing the privatization of BPCL, while Deloitte Touche Tohmatsu India is the transaction adviser.

An external spokesperson for Apollo Global in an emailed response said, “Apollo Global has no comments to offer.” A Deloitte Touche Tohmatsu India spokesperson declined comment. Queries emailed to the spokespersons of Dipam, petroleum and natural gas ministry, Vedanta Group and I Squared Capital on Thursday remained unanswered.

The LPG price for cooking for consumers under PAHAL is subsidized by the government wherein the subsidy quantum given to the PAHAL consumers by way of DBT is the difference between the market-determined price and the subsidized price.

The Centre has paid ₹7.03 lakh crore as fuel subsidy since 2011-12. While petroleum product prices in the country are linked to the price of respective products in the international market, it’s the government which decides the effective price to subsidized domestic LPG consumers. The finance ministry slashed the allocation for LPG and natural gas subsidy to ₹12,995 crore for FY22.

The preliminary information memorandum for BPCL’s disinvestment was issued on March 7, 2020.

“The price bids will be called shortly,” said the first person cited above.