BJP Govt’s Red Carpet Welcome for Oil MNCs
Swadesh Dev Roye
THE recent economic ‘stimulus package’ presented by the Modi government mainly to benefit the big business houses shall cost the exchequer of the country a huge amount Rs 1.45 lakh crore. More such stimulus packages are under consideration of the government. To make good the revenue loss, the government has resorted to selling out public sector undertakings (PSU) with huge physical and financial assets.
The government is turning a blind eye to the fact that privatisation of PSUs is bound to inflict revenue loss on account of loss of huge amount of taxes, duties and dividend payment from these PSUs. Therefore, the stupid steps of mobilisation of fund by selling economically solid and sound PSUs shall ultimately widen revenue deficit of the union exchequer. And ultimately the burden of the misdeeds of the government shall be inflicted upon the common people.
With the motive to fast-track the disastrous process of privatisation, the union cabinet has introduced a shortcut to privatisation bypassing all concerned administrative ministries which are often used to place hurdles on the path of major stake sale. Under the newly introduced path, the Department of Disinvestment has been renamed as Department of Investment and Public Asset Management (DIPAM) and the National Institution for Transforming India (NITI Aayog) will jointly identify PSUs for strategic disinvestment. The monstrous trio - Prime Minister’s Office (PMO), NITI Aayog and DIPAM have been entrusted with dangerous delegation of power to push forward fast the suicidal ‘Project Privatisation.’
SUICIDAL PUSH TO PRIVATISE BPCL & HPCL
The union cabinet has already given its approval for sale of the government’s entire 53.29 per cent stake in BPCL, 63.75 per cent stake in Shipping Corporation, 30 per cent in Concor, 100 per cent in NEEPCO and 75 per cent in THDC. In the meantime, HPCL has been added to the first list. At the instance of Ministry of Petroleum & Natural Gas, ONGC has taken the initiative to sell out its full equity holding in HPCL.
In the past, to justify divestment of equity of PSUs, the governments and private business lobbies used to resort to vilification campaign over the so-called poor performance of the PSUs concerned. But the shocking decision of the present government to completely privatise the excellently run Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL) has clearly established that the central government of the day is totally under the clutch of few crony private business giants and their foreign collaborators.
The Oil PSU giants, BPCL and HPCL, are the historical achievement of the peoples’ protracted struggle steered by the trade unions in the 1950s demanding nationalisation of the MNC-run oil companies in our country. Such struggle had the political and economic perspective of driving out the exploitative oil MNCs from the country and industrialisation of independent India in the public sector.
To recapitulate from history, to demolish the demand for nationalisation, the then oil MNCs in India resorted to severe atrocities on the workers of the oil companies which included closure of oil depots and other installations, retrenchment of workers, reduction of wages, facilities and bringing down retirement age to 45 years etc.
The workers had resorted to strike action in protest and the MNCs took recourse to atrocities. The most shining action of the people during that period was a huge militant demonstration by around 50,000 people in front of the office of Caltex at Chittaranjan Avenue, Calcutta in October, 1967. These are contributing factors behind the nationalisation of oil MNCs and formation of BPCL and HPCL.
In 1903, the Burmah Oil Company commenced its business in India, which was a British enterprise. In 1928, Asiatic Petroleum India joined hands with Burmah Oil Company as well as Royal Dutch Shell and the Burmah Shell Oil Storage and Distributing Company of India Limited was formed. Burmah Shell Refineries was incorporated as a private limited company in 1952 at Bombay and it was the then largest refinery in India.
In 1976, the company was nationalised under the Act of the Nationalisation of Foreign Oil Companies ESSO (1974), Burma Shell (1976) and Caltex (1977). On January 24, 1976, the Burmah Shell was taken over by the government of India to form Bharat Refineries Limited. On August 1, 1977, it was renamed Bharat Petroleum Corporation Limited. It was also the first refinery to process newly found indigenous crude oil produced by ONGC at the Bombay High off-shore deep-sea oil field discovered with the help of USSR.
The oil MNCs which were nationalised to form HPCL were Standard Vacuum Refining Company in 1952 and in 1962 it was changed to ESSO Standard Refining Company and in 1974 with Lube India and ESSO amalgamation, the present HPCL came into being.
For that matter BPCL and HPCL are two historical modern institutions of India. Now Modi government is demolishing these historical monuments of the country – a shameful, shocking and seditious act by the corporate captive government of the day.
PHYSICAL ASSETS OF BPCL
With four refineries – Mumbai, Kochi, Numaligarh (Assam) and Bina, BPCL has a total installed crude oil refining capacity of 38.3 MMT per annum. It is the second largest Oil PSU in the country. The PSU has vast storage locations and distribution installations near all of their refineries. BPCL has 77 major oil installations and depots for storage and distribution of petroleum products, 55 LPG bottling plants, 2,241 km multi product pipeline, 56 aviation fuelling stations in airports, four lubricant plants and lubricant godowns and facilities for unloading and loading of crude and finished products in major ports. Moreover, it has 11 subsidiary companies within India and abroad, 22 joint venture companies and also share-holdings in different companies. In addition, there are huge land holdings of BPCL in prime locations of metropolitan and other cities all over India. The BPCL is having more than 24 per cent market share in the petroleum products marketing in India.
The BPCL is having a sales network all over India for its petroleum products through retail outlets numbering 15,078 and nearly 6,004 LPG distributorship agencies apart from aviation fuel sales facility in airports and lubricants sales shops across the country and other bulk sales. A very important asset of BPCL is its long standing and ever strengthening ‘brand value’. According to the survey of ‘expert opinion’ by ET Energy world, “it (BPCL) has an opportunity to become the second-largest fuel retailer in the fastest growing oil market in the world.”
Moreover at present, BPCL is executing projects costing more than Rs 48,182.00 crores all over the country including the 6.00 MMTA expansion projects of Numaligar refinery. BPCL has been awarded the status of a ‘Maharatna’ company since 2017.
The BPCL has been steadily making profit since its inception through-out the past five decades in addition to the big contributions to the national exchequer every year by way of dividend, direct and indirect taxes, sales tax etc.
Total turnover increased from Rs 2.47 lakh crore to Rs 3.39 lakh crore during 2014-15 to 2018-19. Cumulative profit before tax during this period was Rs 50,576,00 crore and profit after tax was Rs 35,288,00 crore. The petroleum PSU has paid Rs 17,246 crore as dividend during the period. In the last financial year itself the taxes paid to the national exchequer by BPCL was around Rs 96,000 crore.
Also BPCL is having reserves and surplus to the tune of Rs 34,400 crore. On a rough calculation, the real value of the assets of BPCL will be more than Rs two lakh crores.
ASSETS OF HPCL
HPCL has 18 MTTA refining capacity and runs 15,127 fuel retail outlets. The net sales of the company rose around 22 per cent to Rs 3.00 lakh crore in the last financial year, while the profit earned was Rs 7,218 crore.
Under directive from the government, ONGC was compelled to buy the total residue 51.11 per cent government equity of HPC during the financial year 2017-18 at abnormally higher price amounting to Rs 36,915 core. The government resorted to such arm-twisting measure in order to meet its disinvestment target in 2017-18. The ill effect of the deal on ONGC has been that, from a debt-free company, ONGC became a loan laden PSU with no cash and loads of debt on its books. ONGC took loan of close to Rs 25,000 crore to buy the government's equity in HPCL. On the other hand, at the instance of the Ministry of Petroleum & Natural Gas, HPCL's acquisition has so far not worked to the advantage of ONGC as synergies have not flowed in. Moreover, HPCL refused to recognise ONGC as its promoter till recently. ONGC has just one member on the HPCL board of directors.
It is shocking to note that when ONGC was asked to take over HPCL, the government announced that ONGC shall become a combined producing, refining and marketing integrated oil giant of global standard. Now contradicting their own statement the same government is taking a stand that ONGC should concentrate only on production and sell off their refinery and marketing assets, a clear case of doublespeak by Modi-led NDA government.
The BPCL has huge human resource assets. The number of permanent employees is nearly 12,000. The number of regularly working contractual employees are around 20,000. Similarly, the number of permanent employees in HPCL is around 11,000 and that of regularly working contractual workers are more than 31,000. Both the oil PSUs have been providing employment to thousands of reserved and backward class people all over the country.
The contribution of PSUs in providing employment is far ahead of the private sector. According to Labour & Employment Report for 2011-12, Ministry of Labour and Employment, PSUs provide employment to 17.6 million people as against 11.9 million in private sector. Moreover, the quality of employment in PSUs and private sector in respect of job security and compensation package and workplace democratic environment, the situation in the former is far better than the latter.
PREFERENCE TO RIL- ARAMCO COMBINE
It is a matter of serious concern that foreign private oil and gas giants have already infiltrated into the Indian oil & petroleum business with support from the government. Recently, French giant Total SA announced the acquisition of 37.4 per cent stake in Adani Gas, which retails compressed natural gas to automobiles and piped cooking gas to households besides developing import terminals and a national chain of petrol stations.
At the instance of the government, Oil and Natural Gas Corporation (ONGC) has signed a memorandum of understanding (MoU) with US petroleum giant Exxon-Mobil on October 14, 2018 to collaborate in exploration and production of crude oil. BP Plc has acquired a 30 per cent stake in Reliance Industries operated oil and gas blocks. Besides, they entered into a joint venture to set up 5,500 fuel stations across the country.
Reliance has also announced Saudi Aramco's plan to pick up stake in former's refining and petrochemical assets in Gujarat for over Rs one lakh crore. Early this year, Canada-based Brookfield Asset Management's India Infrastructure Trust acquired Reliance's loss-making entity East West Pipeline for Rs 13,000 crore.
Further a strategic entry into the oil sector of the country has been provided to the Saudi oil giant Aramco to store about 4.6 million barrels of crude oil in the country's Strategic Petroleum Reserve in Padur in Karnataka. This step is bound to give strategic advantage to RIL-Aramco combine and can put IOC to disadvantageous situation.
In view of the strategic importance of oil PSUs, excellent physical and financial performance during the decades of operation and the huge physical assets created by both the oil PSUs, handing over these national assets to private oil giants both domestic and foreign would be a clear act of betrayal to the nation and the people by the government of the day.
The RIL’s present refining capacity is 62 MMTA. If BPCL and HPCL refineries are captured by RIL, their (RIL) total refining capacity will jump to around 120 MMTA and obviously RIL shall emerge as decisively dominant oil refining company in our country.
Similarly once the huge sales network with the strategically located retail outlets (petrol pumps) of both BPCL and HPCL totaling about 30,500 are captured by RIL, the decisive control of the marketing segment of oil and petroleum business shall become the private domain of the company (RIL).
Now it is of utmost public interest that today more than 75 per cent of the Indian fuel marketing business is owned by three PSU OMCs – IOCL, BPCL and HPCL. Based on this strength even in the deregulated fuel pricing regime, government has scope to exercise some control on fuel pricing.
But once BPCL and HPCL are fully privatised surrendering the controlling power to RIL, one can easily imagine as to how the petroleum products price shall start skyrocketing in the country. Precisely, the vital strategic importance of India in respect of energy security and energy economy shall be fully under the joint grip of private oil giants from within the country and abroad.
Further, the PSU giants have been spending lakhs of crores for extending various welfare services to the people and the society in the matter of health services, drinking water, sanitation, education, roads, electricity and other infrastructure under the ‘corporate social responsibility’. The funding for the ‘Swachh Bharat’ scheme of the government has been fully financed by the PSUs. On the contrary, private sector is hostile to the concept of CSR itself let alone doing anything worth-noting.
The employees on the payroll of both the PSUs including the contractual workers shall eventually lose their jobs. The reasons, inter-alia, are that the authoritarian powers are being extended to the employers to ‘hire and fire’ employees by the government through the on-going pro-employer changes in labour laws under the guise of Code on Wage, Code on Social Security, Code on Health & Safety and Code on Industrial Relations. The level of pay, perks and facilities achieved by the PSU employees through long drawn struggles would not be accepted by the oil MNCs. The private sector oil companies employ only fixed term contractual workers and pay poor wages, in other words there is no system of appointing permanent workers. These private companies’ manpower policy is ‘lower workforce and higher workload’
In 2002, the then National Democratic Alliance (NDA) government headed by the former prime minister Atal Bihari Vajpayee took steps to privatise BPCL and HPCL. Reliance Industries, BP of UK, Kuwait Petroleum, Petronas of Malaysia, the Shell-Saudi Aramco combine, and Essar Oil had submitted ‘Expression of Interest’ for buying out outright both the oil companies. The then government had also decided to hive-off the total marketing set-up of IOCL and sell off to the private sector.
However, the government’s move was defeated under the multipronged pressure of strike action by the workers of BPCL and HPCL first followed by the historical strike action by the entire oil PSU workers, powerful intervention by the opposition parties in parliament and of course the historical judgment of the Supreme Court of India.
It has been a conspiratorial act with ulterior motive of privatisation by the NDA government that in 2016, they piloted and passed in parliament the Repealing and Amending Act of 2016 and thereby annulled "187 obsolete and redundant laws lying unnecessarily on the Statue-Book" including the Act of 1976 that had nationalised erstwhile Burmah Shell. The government repealed the legislation that had nationalised the company, doing away with the need to seek parliament nod before selling it off to private and foreign firms. Practically the Modi government has hoodwinked parliament.
MUMBAI CONVENTION AND FORTHCOMING DELHI CONVENTION
On October 26, 2019 a united national convention of oil PSU workers was held at Mumbai where representatives from ONGC, IOC, BPCL, HPCL and GAIL workers took part from all over the country. National Leaders of INTUC, AITUC, CITU, Bharatiya Kamgar Sena addressed the convention. It has drawn a long chain of programmes of campaign, agitation and action. The culminating action is one day nationwide strike by workers of BPCL and HPCL on November 28, 2019.
Another national convention with wider participation is ready to be held in New Delhi on November 20. On November 9, the northern regional convention will be held at New Delhi focusing the strike preparation as well as preparatory steps for the forthcoming national convention on November 20.
In the meantime, local level struggles of BPCL and HPCL workers mainly at Mumbai, Kochi, Visakhapatnam and Numaligarh (Assam) have been continuing including massive mobilisationa to memorandum submission by delegations of workers to the governments and legislators. Notably, the chief minister of Kerala has already written a letter to the prime minister on October 17 requesting him to give-up the move to privatise BPCL.
It is important to note that Numaligarh Refinery has been set up in the public sector on the basis of the Assam Accord. Obviously, there is perceptible protest and anger amongst different sections of the people of Assam against the privatisation move. Student organisations and local people have been staging protest demonstrations separately at the Refinery gate and before the office of the DM of the district. The Numaligarh Employees Union has been conducting various agitations.
The national convention in New Delhi on November 20 and the nationwide strike action by BPCL and HPCL workers on November and 28, are expected to provide a big push to the ongoing opposition to the decision of the corporate captive Modi government to hand over the strategically important oil PSUs with shining record of physical and financial performance to the Indian and foreign private oil companies.