Centre to clarify on allowing 100% FDI in BPCL privatisation

NEW DELHI: The ministry of commerce and industry will soon clarify that 100% foreign direct investment (FDI) will be applicable in the privatisation of Bharat Petroleum Corp. Ltd (BPCL), as the government is exiting the company. The move aims to remove any possibility of confusion, as FDI is now permitted only up to 49% in public sector petroleum refiners.

“100% FDI is already permissible in private sector refining. As BPCL is getting privatized by the government, the same should apply to it as well. DPIIT (department for promotion of industry and internal trade) will soon clarify this,” a government official said on the condition of anonymity.

The current policy permits up to 49% FDI through the automatic route in petroleum refining PSUS, without any disinvestment or dilution of domestic equity in the existing PSUS. However, the policy permits 100% FDI through the automatic route in petroleum refining in the private sector.

“As this is not a policy change and only a clarification, the government can get away with this, though the BPCL privatisation process is already on and the deadline for fresh bids is over,” an FDI policy expert with a law firm said on the condition of anonymity.

The Centre has approved the sale of its entire 52.98% shareholding in BPCL along with the transfer of management control to a strategic buyer. Preliminary information memorandum/ expression of interest (PIM/EOI) for strategic disinvestment of BPCL was issued on March 7 2020. The last date for submission of EOI was extended a few times up to November 6 2020. The transaction has now moved to the second stage with the receipt of multiple Eois. Vedanta Group and two American funds, Apollo Global and I Squared Capital, have reportedly submitted Eois.

The decision to privatize the profitable oil marketer is based on the reasoning that the presence of a private sector player would break the state-controlled oligopoly and benefit consumers, minister of state for finance and corporate affairs Anurag Singh Thakur said in the Lok Sabha in a written reply to a question in March.