Oil Minister Dharmendra Pradhan cited the four-decade old Nationalisation Act to justify exempting ONGC from making an open offer after acquiring the government’s 51.11 per cent stake in HPCL.
Oil and Natural Gas Corp (ONGC) acquired government’s 51.11 per cent stake in HPCL for Rs 36,915 crore but unlike similar deals, it did not make an open offer to buy an additional 26 per cent stake from minority shareholders of HPCL.
“We are bound by the Nationalisation Act and character of HPCL could not have changed so no open offer was mandated,” Pradhan told reporters here.
HPCL came into existence in 1974 when the government took over erstwhile Esso Standard and Lube India Ltd and nationalised it through the ESSO (Acquisition of Undertaking in India) Act passed by Parliament.
The Supreme Court had in 2003 cited this law and the Burma Shell (Acquisition of Undertaking in India) Act, 1976 and Caltex (Acquisition of Shares of Caltex Oil Refining India Ltd and all the Undertakings in India for Caltex India Ltd) Act, 1977 to rule that the government cannot privatise HPCL and Bharat Petroleum Corp Ltd (BPCL) without approaching the Parliament for changing the nationalisation act.
While Pradhan said Hindustan Petroleum Corp Ltd (HPCL) will continue to remain a central public sector enterprise (CPSE) by virtue of government holding majority stake in ONGC, he did not say as to how the character of HPCL would have changed if ONGC’s shareholding in HPCL would have increased to 77 per cent after the open offer.
Rules currently state that a subsidiary, in which a PSU holds more than 50 per cent stake, is a state-owned firm. Asked how the ONGC-HPCL deal was different from Indian Oil Corp (IOC) in 2002 taking over fuel retailer IBP Co Ltd in 2002, he said, “HPCL is governed by nationalisation act.”
The government had reasoned exemption from open offer saying “the management complexion is not changing. So it is a related party transaction”.
Way back in February 2002, state-owned IOC had acquired government’s 33.58 per cent stake in fuel retailer IBP Co Ltd for Rs 1,153.68 crore and had to make an open offer for additional shares.
