BPCL Sale Not Moving Forward As Bidders Question Unofficial Price Control

As India plans to sell a majority stake in Bharat Petroleum Corp. Ltd., bidders to take control of the country’s second-biggest state-run refiner have raised queries over freedom to pass on higher crude prices to retail buyers, according to two government officials.

Concerns over overall cost of the deal, India’s energy transition, changes in policies on downstream and upstream investments, and oil post-war were also raised in closed-door meetings with the central government’s transaction advisers, one of the officials quoted above told BloombergQuint on the condition of anonymity as the matter is confidential.

Retail prices of petrol were deregulated in 2010 and diesel in 2014, allowing them to move in line with the market. In some metros, it was decided to revise rates daily to accurately reflect international prices. But state-run oil marketing companies often refrain from revising prices ahead of polls, making it difficult for private peers to increase prices as crude rises.

State-run retailers froze fuel prices for 137 days starting November after election campaigns in Uttar Pradesh, Punjab, Uttarakhand, Goa and Manipur began. During that period, crude surged 40% to hit a 14-year high of $139.13 a barrel as Russia invaded Ukraine. After polls concluded last month, petrol and diesel have turned costlier by close to Rs 11 a litre after a series of small hikes.

In May 2018, retail fuel prices were held for 19 days ahead of Karnataka elections. OMCs froze rates for 74 days in a row starting January 2017 when elections in Punjab, Goa, Uttarakhand, Uttar Pradesh, and Manipur were due.

According to an official quoted above, transaction advisers have on multiple occasions reported that bidders have been seeking clarity over pricing of fuel as it largely determines their revenue calculations.

BloombergQuint’s emailed queries to the Department of Investment and Public Asset Management remained unanswered.

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