It is indeed shocking that the Modi government has put a real PSU jewel that is Bharat Petroleum Corporation Ltd (BPCL) on the block in order to achieve its disinvestment target of Rs 2.1 trillion for the current fiscal. It is a measure of the government’s desperation that in the first nine months of FY21 it has succeeded in raising only Rs 12,225 crore. Hence, as per its logic, the sale of BPCL is crucial for the government to make its disinvestment target a success

BPCL is a giant among PSUs, and one fails to understand why the government wants to put such highly-prized family silver under the hammer. If the government is in urgent need of funds to meet unproductive expenditure like reconstructing the Cental Vista in New Delhi or to underwrite pandemic relief packages, it should have selected unviable and loss-making PSUs. No government anywhere else in the world would dream of auctioning off such a valuable asset. BPCL has a humongous oil refining capacity of 38.3 million tonnes across Kochi, Mumbai, Bina and Numaligarh, accounting for an over 25 per cent marketshare in the domestic oil refining segment. It is also the second largest fuel retailer in the country. Moreover, it is engaged in other businesses like product pipelines, LPG, industrial fuel, ATF, lubes and gas sales, and has stakes in Indraprasth Gas (22.5 per cent) and LNG Petronet (12.5 per cent). It also has a 63.38 per cent stake in the Bharat Oman Refinery joint venture, and is all set to acquire Oman’s share to make it a wholly owned entity. Considering BPCL’s tremendous growth potential, it is wholly appropriate to ask why such a PSU jewel is being put on the block.

But the Modi government seems to have a one-track approach to mega policies like disinvestment, and if wiser counsel does not prevail in aborting the sell-off of BPCL, the least that should be done is to ensure that it is not offered to any private sector industrialist at a throwaway price.

The market capitalisation of the company’s stock works out to Rs 46,000 crore, but it would be foolish to use that as an auctioning benchmark. BPCL’s assets (including offices in metropolitan cities and surplus land) in refineries are so vast that they alone could fetch that amount (Rs 46,000 crore) without impacting its core refinery business.

It is worth remembering that three years ago, in August 2017, the Essar group refinery with a capacity of 20 million tonnes, located at Hajira in Gujarat, was sold to a Russian company for $ 12.9 billion (Rs 82,763 crore at the then exchange rate of Rs. 64 to a dollar). That should give some idea of the true enterprise value of BPCL, which has four refineries with a total capacity of 38.3 mmta (and, moreover, going by the current exchange rate of Rs. 75 to a dollar). BPCL’s huge potential and its value cannot by measured by its market capitalisation. If the government offers stable taxation regime for gasoline and diesel sales as their 17,325 retail outlets can be valued at around Rs 1,00,000 crore based on RIL-British Petroleum and other similar retail outlet stake sales. Moreover, on replacement cost basis refinery and terminal depots network can potentially add enterprise value of around Rs. 40,000 crore each, over and above value from other businesses like product pipelines, gas, LPG, industrial fuel, ATF, lubes and stakes in IGL & LNG Petronet.

Having stuck to its short-sighted decision to sell off BPCL, the government should at the very least not be a foolish bargainer by palming off one of the country’s ‘ratnas’ at a throwaway price.