Post-stake sale, BPCL's LPG business to be in SBU, new owner to take call after 3 years

Privatisation-bound Bharat Petroleum Corporation Ltd's (BPCL) new owner will after three years of takeover get a right to decide on retaining the business of selling subsidised LPG, which in the intervening period will be transferred into a new unit to continue the flow of government subsidy, a top official said.

Government subsidy will continue to be given to BPCL customers if the new owner chooses to retain the business after three years, the official said.

The firm's cooking gas LPG customers will be transferred to other state-owned firms, Indian Oil Corporation (IOC) and Hindustan Petroleum Corporation Ltd (HPCL), in case the new owner does not want to continue with such a business, the official added.

The government is keen to continue providing subsidy to 7.3 crore domestic cooking gas (LPG) consumers of BPCL even after the firm's privatisation. To resolve the conflict of paying the dole to a private company, it has been decided to transfer the LPG business of the firm into a new strategic business unit (SBU).

The SBU will maintain separate accounts, with records of subsidy received and digitally transferred to user accounts, the official said.

The accounts will be audited to ensure no pilferage, he said.

Subsidy to privatised BPCL will not result in similar payout to other private LPG retailers. "BPCL is a legacy company and overnight subsidy flow to users cannot be stopped," he said.

There will be a three-year lock post-government exit from BPCL, the official said. "The new owner cannot sell any asset or the SBU for three years. Post three years, the new owner will have a right to decide on retailing the LPG business."

The government gives 12 cooking gas (LPG) cylinders of 14.2-kg each to households in a year at a subsidised rate. The subsidy this month is about Rs 50 per cylinder, which is directly paid into the bank accounts of the users.

The subsidy is paid in advance and consumers use this to buy LPG refills that are available only at market price from dealers of oil marketing companies -- IOC, BPCL and HPCL.

The moment a refill is bought using the subsidy, another instalment is transferred into the user bank accounts.

On November 27, Oil Minister Dharmendra Pradhan had told PTI that government subsidy to BPCL customers will continue after the privatisation of the nation's second-biggest fuel retailers.

"Subsidy on LPG is paid to consumers directly and not to any company. So the ownership of the company that sells LPG is not of any material consequence," he had told PTI.

Pradhan had said the LPG subsidy payment is done digitally to all verified customers.

"Since it is paid directly to consumers, it does not matter if the servicing company is public sector or private sector," he said. "LPG subsidy will continue as before to BPCL consumers even after disinvestment."

The government is selling its entire 53 per cent stake along with management control in BPCL. The new owner will get 15.33 per cent of India's oil refining capacity and 22 per cent of the fuel marketing share.

It also owns 17,355 petrol pumps, 6,159 LPG distributor agencies and 61 out of 256 aviation fuel stations in the country.

BPCL services 7.3 crore out of 28.5 crore LPG consumers in the country.

Privatisation of BPCL is part of plans to raise a record Rs 2.1 lakh crore from disinvestment proceeds in 2020-21 (April 2020 to March 2021).

BPCL operates four refineries in Mumbai (Maharashtra), Kochi (Kerala), Bina (Madhya Pradesh), and Numaligarh (Assam) with a combined capacity of 38.3 million tonnes per annum, which is 15.3 per cent of India's total refining capacity of 249.8 million tonnes.

While the Numaligarh refinery will be carved out of BPCL and sold to a PSU, the new buyer of the company will get 35.3 million tonnes of refining capacity -- 12 million tonnes Mumbai unit, 15.5 million tonnes Kochi refinery and 7.8 million tonnes Bina unit.