Privatisation of BPCL in India

A Bold And Pragmatic Strategy Of Modi Government

by N.S.Venkataraman

Bharat Petroleum Corporation (BPCL) is a government of India undertaking, presently involved in petroleum refinery and production of petro chemicals.The company is presently implementing major projects in Kochi in Kerala.

BPCL is a profit making company. Most of the petroleum refineries with petrochemical derivative products such as Reliance Industries , Government of India owned Hindustan Petroleum Corporation Limited, Indian Oil Corporation Ltd., are all profit making companies.

While explaining the reason for privatizing BPCL, the Indian Petroleum Minister has said that the Government has no business to be in business. Obviously, he is repeating the original statement made by Mr. C. Rajagopalachari (Rajaji), the first Governor General of independent India and a statesman who could think ahead of his time, who said that “ government is to govern and not to do business”.

However, the leftist parties in India and the critics of Modi government have disapproved the move to privatize BPCL along with the transfer of ownerhip of a few other public sector undertakings, arguing that the government is handing over the BPCL, which is “milk cow” to private sector entrepreneurs and in the process, the government is sacrificing a well run government owned company.

This is not the first time that a large government owned petro chemical company has been privatized. Indian Petrochemical Corporation Ltd. (IPCL) in Gujarat was a well run company belonging to Government fo India and was privatized and handed over to Reliance Industries several years back,. Modi government was not in power at that time.Several other government owned organisations have also been privatized in recent years.

The critics argue that the Modi government is privatizing well run government owned companies to earn money to conceal it’s resource crunch. This is a statement in vacuum and born out of lack of taking a holistic view of the scenario.Of course, government will get income by privatization,but this is not the sole objective of privatization.

Ever since independence of India and even before that, several industries and organisations have been set up by the government as well as private entrepreneurs.

In some occasions, private companies seem to be unwilling to invest in some projects due to variety of reasons, though such projects are extremely important for India’s progress and growth. In such cases, the government has to enter and set up such strategically important projects. This is how Steel Authority of India was set up by Government of India to construct several steel plants in the country, when private sector was unable to raise the resources for such projects.

It is always seen that the private companies do not want to take calculated risk under any circumstances, while investigating the various project opportunities and taking investment decision,which show lack of dynamism of many private companies in India.

Private sector in India are also not investing adequately in research and development activities, as such R&D ventures do not provide quick returns and could be a calculated risk from the investment point of view.

When public sector organisations are privatized, it is true that the government gets the money. At the same time, in the process of privatizing , several private Indian companies and multi national companies could show interest in taking over and making more investment and introducing updated technologies, which would benefit the country’s industrial and economic growth. Such investment particularly from multinational companies are now badly needed in India since India’s domestic technology standards are not adequate in many cases and are not globally competitive enough to set up new projects. Further, the investment capability of private Indian entrepreneurs are not adequate enough to set up several large scale projects to ensure rapid progress in the industrial growth in the country.

There are many projects in India with potential opportunities that are not being set up by the private sector. It is certainly the job of the government to invest in areas where private sector would not want to venture due to various reasons and such projects may be very badly needed in the country.

While the government may privatize some of the undertakings, it would also set up new projects to ensure industrial progress.

For example, Modi government is reviving number of urea fertilizer projects, which have remained closed for the last several years and where private sector did not show interest in investing and reviving the units. Another impressive example is Modi government’s decision to set up pilot plants for production of bio ethanol from agricultural waste for the first time in India, to ensure the availability of ethanol for use as automobile fuel and to reduce import dependence on crude oil. Modi government has also invested in setting up pilot plant for production of methanol from coal based on domestic technology development efforts, as India presently imports around 1.7 million tonne of methanol and coal which is be used as feedstock for methanol production is abundantly available in India.

It is high time that the critics understand that government should act as catalyst for growth by promoting and investing in industrial projects.

At the same time, the government should also dis engage itself from the existing projects from time to time by privatizing selected projects and handing them over to the interested private project promoters. This would enable the government to find resources to set up more much needed projects in appropriate area by Government.

This sort of approach is what Rajaji aptly described as government is to govern and not to do business.