HPCL and BPCL were unnerved by a SC notice to the Centre in response to a public litigation case over their divestment.

As a result, by 10:25 IST, HPCL slumped 5.01% to Rs 289 and BPCL dropped 4.07% to Rs 225.10. Volumes on the two counters amounted to 88,546 shares and 10,202 shares, respectively.

In contrast, over the last month, the two scrips enjoyed an upbeat run, gaining 14.4% and 9.83% respectively as their divestment was being seen as imminent. Apex court, the Supreme Court, has issued a notice to the Centre over the divestment proposal of state-run oil refiners and retailers Hindustan Petroleum Corporation and Bharat Petroleum Corporation. The notice follows a public interest litigation filed with the Supreme Court by the Centre for Public Interest Litigation terming the divestment as illegal.

The CPIL contends that the government's decision to divest stake in HPCL and BPCL did not have parliamentary approval.

HPCL and BPCL, which together command a 40% petro market share, were nationalised through an Act of Parliament in the 1970s and CPIL contends that divestment in these two companies could be done either by repealing or amending the acquisition Acts concerned and that there was no other way of going about it.

Contending that Parliament was supreme in the constitutional scheme of things, the petition said no executive action could be taken in violation of parliamentary enactments.

Last month, the Supreme Court gave clearance to the Centre to proceed with the privatisation of HPCL and BPCL, saying the pendency of a petition challenging the same should not deter the government from divesting its equity stake in these two companies. A Bench comprising Justice M. B. Shah and Justice Arun Kumar adjourned the hearing on a writ petition filed by Federation of All India Petroleum Traders.

Earlier, the Centre announced plans to offload stake in BPCL through the initial public offer route, and privatising HPCL through a strategic sale.

In January 2003, the Centre gave the green signal for the divestment in HPCL and BPCL. As per its plans, HPCL's equity (34.01%) would be sold to a strategic partner and 5% to the company's employees. The Centre was to retain 12% holding in the company. Currently, the Centre's stake in HPCL is at 51.01%. In respect of BPCL, the Centre plans on an IPO for 35.2% stake, 5% will be reserved for company employees. The Centre will retain 26%.

HPCL has about 4,600 retail outlets and a 20% market share in retailing petroleum products. BPCL has about 4,500 retail outlets and a 20% share in the petroleum products market. As per recent reports, BPCL plans to double its refining capacity to 2,40,000 bpd from the current 1,30,000 bpd by October 2004, and modify its refineries so that it can process different grades of oil. The total cost of the expansion and modernisation is estimated at Rs 1,831 crore (Rs 18.31 billion), of which Rs 1,200 crore (Rs 12 billion) has already been spent.

For the third quarter ended 31 December 2002, HPCL registered a gigantic 444% rise in net profit to Rs 330.62 crore (Rs 3.3 billion) on a 28% jump in net sales to Rs 14,210.23 crore (Rs 142.1 billion). BPCL recorded net profit at Rs 233 crore (Rs 2.33 billion), up 224% over the Rs 71.90 crore it registered in the corresponding period of the previous year. Net sales increased by 29% to Rs 12,645.2 crore (Rs 126.45 billion) from Rs 9,801.1 crore (Rs 98.01 billion) in DQ 2001.

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