THE BIG GUN: Strategic sales will not yield political benefits, says Fernandes

Just when disinvestment was turning out to be a success story for the Vajpayee Government, an ugly political fight over the sale of two oil companies, HPCL and BPCL, has mired the process.

The controversy took an unexpected turn when Defence Minister and NDA convener George Fernandes wrote to Prime Minister Atal Bihari Vajpayee on August 27, strongly opposing the move to disinvest the two companies. "I am not opposed per se to disinvestment," he told Vajpayee at a meeting. But, in his one-page letter, he said that the political benefits of good governance would not accrue through the current privatisation policy and that there was need for wider participation. The strategic sale policy was "making the rich richer and creating private monopoly", he wrote, also drawing upon examples from developed economies. The minister who rarely intervenes at cabinet meetings provided a fresh edge to efforts aimed at blocking the sale.

Fernandes' objection has now loaded opinion among senior cabinet ministers against Disinvestment Minister Arun Shourie who argues that the HPCL-BPCL case will be seen as a test of the Government's will to pursue privatisation.

There is also a distinct undercurrent of corporate conflict as many of those opposed to the sell-off fear that Reliance Industries Limited (RIL) will pick up one of the oil companies thereby increasing its redoubtable clout in the petro-chemical sector.

STEEPLE JUMP: Shourie is boxed in and may well be running out of friends

Though Fernandes began to take an active interest in the disinvestment proposals about two months ago, the tug-of-war goes back much further. To stall the sell-off initiative, Petroleum Minister Ram Naik has been clamouring for the entire sector to be termed "strategic". The Cabinet cleared the proposal to sell the oil companies in February this year but since then there's a feeling that the strategic sale route should not be applied across the board and that profitable PSUs should not be put on the block. In 2001-2, HPCL's net profit was Rs 788 crore (turnover Rs 45,287 crore) and BPCL's net profit was Rs 835.72 crore (turnover Rs 40,094.88). Subsequently, the meeting of the Cabinet Committee on Disinvestment (CCD) to discuss the HPCL-BPCL issue has been put off four times in the past couple of months while the August 29 meet was scheduled and cancelled thrice last week.

The opposition to the sell-off has come from the RSS as well, with old-time Sangh activist S. Gurumurthy pleading that it would create private monopoly. The RIL too has done its bit of campaigning. According to Government sources, Vice-Chairman and Managing Director Anil Ambani called upon Finance Minister Jaswant Singh and Deputy Prime Minister L.K. Advani to say that if the Government felt uncomfortable about RIL buying the oil retailing companies, the group would not bid. The two ministers brushed aside RIL's suggestion.

It is now being felt that Naik's proposal-that the two firms be allowed to float an IPO-should be considered. Shourie's argument, however, is that the terms of the bid make it impossible for any bidder to acquire both companies. At the CCD meet on September 7-where Fernandes will be a "special invitee"-Jaswant and Naik, besides new Power Minister Anant Geete, are expected to oppose privatisation. Given the controversy, Advani may not favour an instant resolution of differences.

Shourie remains inflexible. And, if the CCD meeting ends on an inconclusive note, the headstrong minister may well force a political crisis.

-Rajeev Deshpande