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Oil firm privatization looks set to take a winding road


Indian oil refinery: the government has found a new
formula for limited privatization but there could still
be obstacles ahead

Dogged by political opposition, India's government is going half-throttle on the privatization of two key petroleum refining and marketing companies. The sale of Hindustan Petroleum (HP) and Bharat Petroleum (BP), once owned by foreigners and nationalized in the 1970s, have faced several roadblocks over the past year, minister for petroleum Ram Naik being a staunch opponent.

The government cleverly worked out a compromise late in January that conceded little to its critics while removing an important obstacle to privatization, and paving the way for possibly India's first billion-dollar privatization sale.

Soon after the attorney general ruled that the sale of HP and BP did not need parliamentary approval in January, the government announced that it would privatize just HP, and sell minority shares of BP to investors. The plan is for 34% of HP's shares to be sold to a strategic investor around July this year (the government currently owns 51%), while around 35% of BP will be sold in the Indian and international capital markets in the third quarter.

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