HPCL-ONGC Deal – The Disinvestment That Wasn’t

Instead of implementing structural reforms, the government continues to bail itself out

While presenting the Union Budget on February 1, Arun Jaitley proudly proclaimed that his government had already surpassed the disinvestment target of ₹ 72,500 crore. The Finance Minister also maintained that the government will receive funds in excess of ₹ 1,00,000 crore from disinvestments in the current financial year.

Of course, a large chunk of the money will come from the recently completed acquisition of Hindustan Petroleum Corporation Limited (HPCL) by the Oil and Natural Gas Corporation of India (ONGC). Sale of one government company to another, does not achieve anything substantial.

The ONGC made the acquisition by taking loan of ₹ 35,000 crore for the acquisition. So basically the government took a loan to buy its own assets; yes, really! As pointless as it sounds, this is not the first time that the government has played this game. The state-owned Life Insurance Corporation of India (LIC) has put in more than ₹ 60,000 crore in the so called ‘disinvestment’ offers made by the government in FY 2017-18. One can easily see why it was so easy for the government to ‘surpass’ its target of disinvestment, it just had to move money from one pocket to another.

The present government is not the only one trying to fool the public with this gimmick. Since 2011-12 more than 37% of all disinvestments by the central government happened through LIC. The insurer invested ₹ 11,426 crore in stake sale in ONGC in 2011-12, bought more than 70 per cent of the ₹ 1,514 crore raised from share sale of Steel Authority of India Limited in 2012-13, and made many other similar deals over the years.

Successive governments want to keep controlling our resources, so they can hide their failure to manage the finances of the country. Time has come for us to demand that the government lives within its means and give our resources back to us instead of deploying them in inefficient schemes and pointless gimmicks to fool people. With another acquisition jumla, the Finance Minister has given a clear signal to the markets that his government is not interested in implementing real reforms.