LEADER ARTICLE
HPCL Obsession: Question of Skewed Priorities

The September 16 judgment of the Supreme Court restraining the government from privatising Hindustan Petroleum Corporation without obtaining parliamentary approval was followed by an outburst from disinvestment minister Arun Shourie.
He claimed the court''s decision had jeopardised the entire privatisation programme. The Cabinet Committee on Disinvestment will be meeting on October 3 to decide the future course of action.
Shourie has clearly over-reacted. By making the privatisation of HPCL a prestige issue and by selectively criticising the apex court''s order, he is not only on a slippery legal slope but also ignoring the real reasons why the policy he is pursuing lacks political consensus. The privatisation of HPCL has been opposed not only by Mr Shourie''s own ministerial colleague, petroleum minister Ram Naik, but also by many in the NDA government.
By attempting to push through HPCL''s privatisation against all odds, Shourie may acquire a martyr-like halo. But he would have done irreparable harm to a more prudent policy of privatisation that not only reduces the role of government in the economy but also ensures that the proceeds from the sale of shares of public sector undertakings are used for socially laudable purposes.
Shourie, attorney- general Soli Sorabjee and others have argued that since HPCL comes within the purview of the Companies Act, its privatisation by an executive fiat should be similar to the way Maruti Udyog or Bharat Aluminium Corporation was privatised or the manner in which a PSU like National Textile Corporation could be privatised. There is a simple flaw in this logic. Under the Companies Act, there are many kinds of corporate bodies and at least two types of government companies, defined as corporate bodies in which the Union government holds not less than 51 per cent equity shares.
Whereas both kinds of government companies could have been set up by acts of Parliament, in one type of government company, there is no legal requirement to seek Parliament''s approval to change the status or character of such a government company to make it a non-government one. HPCL does not fall within this category of a government company. In the case of HPCL, the government is legally bound to obtain Parliament''s approval if it is to become a non-government company. Whereas the government has divested 49 per cent of its equity in HPCL, the act under which it was established after acquiring the assets of foreign oil companies specifically states that HPCL should remain a government company.
As former chairman of the Disinvestment Commission G V Ramakrishna pointed out that if the government decides to call for a review of the SC order, it could open a Pandora''s Box of issues relating to the separation of powers among the executive, the legislature and the judiciary operating under a constitution in a democratic polity. If indeed, Shourie''s privatisation programme has political consensus — as is claimed — then what prevents him from going to Parliament?
The questions are simple. What prevents the government from privatising IOC or GAIL or BHEL or NTPC or other blue-chip PSUs for which specific parliamentary approval is not required? Answer: Lack of political will. Why then is the government so keen on privatising HPCL? Is it simply to pare Ram Naik''s fiefdom? Why was Shourie in such an unseemly hurry to complete due diligence formalities for HPCL even after the Supreme Court had reserved its judgment?
HPCL is not merely one of the best- managed, most-profitable PSUs in the country. It is being eyed by a number of potential bidders. Among the likely bidders for managerial control over HPCL is the Reliance group which has oil refining facilities but has no marketing and distribution network worth the name.
Besides Reliance, another company, Shell, a giant multinational corporation is reportedly keen on becoming HPCL''s strategic partner, a euphemism for acquiring managerial control. Here is what Vikram Mehta, head of the Shell group of companies in India, wrote in The Econo-mic Times (September 25): "I am suggesting that such politically sensitive decisions should not be contemplated unless the leadership is assured of cross party support and/or are prepared to push them through, come political hell or highwater."
The fracas over privatising HPCL is only the symptom of a larger disease. On December 9, Mr Shourie had told the Lok Sabha that the government would set up a Disinvestment Proceeds Fund for utilising the money obtained from the sale of shares in PSUs for socially laudable purposes. (So had Manmohan Singh in 1992, the Disinvestment Commission in 1997 and Yashwant Sinha in 1999.) Such a Fund is nowhere in sight. Shourie is concerned about what the Supreme Court stated about movement of money from the Consolidated Fund of India. But why has his ministry not succeeded in persuading North Block to expedite the establishment of the Fund he talked about nearly ten months ago.
Since elections are round the corner, one would have thought that the government would seek support for its privatisation programme by spending the proceeds of divestment on building schools and houses for the poor. That could help build political consensus for the rather controversial metho-dology followed by the Vajpayee government to "sell the family silver to pay the butler" — to use Jim Callaghan''s colourful phrase.