Will it be misery attracting company for Indians? Or will there be a company attracting misery? Experts believe that in all likelihood, Indians will soon get to see, a hitherto unseen development in the Oil & Gas Sector. NewsIP, has always strived to bring to its esteemed readers, the latest and in depth analysis of developments in the Corporate and Civic world. It has carried out the crusade despite concealed and overt threats. A sort of sworn duty to keep people of India, informed of what it considers best for them. An alternate view to the traditionally one is not readily accepted. Minority views and expressions of the common man is what it has stood for. In many instances, the news portal predicted events which later came out to be true. NewsIP stayed away from sensationalism and endeavored to be a voice of reason, the voice of the common man. And in so doing, it angered some powers to be. At that same time, it also has endeared itself to readers, often featuring in maximum Google hits. These in itself are more than a handsome reward. NewsIP has been echoing the views of renowned economists, scientists, retired bureaucrats, captains of industry as well as civic leaders. In its quest for sharing information beyond ordinary knowledge frontiers, it reported, in a series of articles, views that India as a country, may not be ready, as yet, for total capitalism. More so, when it is seen, that many developing countries which championed total capitalism seem to be facing difficulties now. Total obliteration of PSEs and handing over infrastructure to private ownership may not be the ideal solution for a country like India, many economists say. The existence of parallel “India” and “Bharat”, amongst other things, make complete capitalism a bit impractical.
The government having to meet immediate budgetary requirements/reduce deficits has often been selling prime corporate entities, owned by the government of India. Some of these had served the nation well but fell into difficult times due to mismanagement. It was not a case of a wrong premises, warped paradigms or economic challenges but more of utter mismanagement, negligence and at times misuse of power by politicians. Its sheer irony that a union minister, in one of his discourses recently, publicly admitted that the attempt to sell BPCL, a profitable PSE, was possibly incorrect. Something to the effect, that the company’s dividend in one particular financial year, surpassed the estimated sale price, was also mentioned. Well, BPCL somehow escaped the privatization chopping board. Albeit, though only temporarily, there was mud on the face of advisors of total privatization. But the lobby was just retired hurt! The lucre of easy finance from selling family silver is too irresistible. Constantly efforts were made to formulate designs of raising capital from disinvestment of PSEs. Since no one was willing to buy loss making PSEs, profit making ones became targets. Many would say price estimations for selling these fine organizations were itself questionable. Explanations of the real value and true cost benefit analysis was never attempted. At least such figures are not really available in the public domain. NewsIP had carried a series of articles on the Pros and Cons of such outright sales of PSEs, based on analysis of domain experts and seasoned economists. Many PSEs like ITDC, AI, Maruti, CMC, BALCO, IPCL,etc,. in fact lost intrinsic value after privatization, or like STC (which is a non-operative company now); observers claim. (Readers are requested to look up the references given at end of this report.)
To the dismay of most Oil & Gas experts, though one has to admit not unpredictably, the process of dismantling of one of the leading Oil PSEs has apparently been set into motion. NewsIP has in its possession, a Public Notification issued by PNGRB dated 08.05.2025 where it has stated that it is of the opinion that it is necessary to declare Barauni – Kanpur Petroleum and Petroleum Products Pipeline (BKPL in short) as a common carrier. PNGRB has gone on to cite some justifications for forming the opinion and opined that it is necessary to declare Barauni- Kanpur Petroleum and Petroleum Products Pipeline (1227 KMs) as a Common carrier or Contract Carrier Pipeline. It has invited views, suggestions, and objections from any person or entity under Section 20 of the PNGRB Act, 2006 within one month. Oil & Gas experts state that Cross Country Pipelines are the most economical and environment friendly means of transportation of crude & petroleum products. However, these Pipelines are capital intensive and have long gestation periods. Further, land acquisition for these Pipelines in India, has become increasingly difficult in recent times. Government PSEs had the foresight for investing in Pipelines at the appropriate time. These Pipelines may now have negligible book value but continue to make good profits, contributing to bottom lines and the government exchequer. In some PSUs, the Pipeline Division is the sole profit making division due to its very nature, fuel efficiency and 100% usage with minimum wastage. There is another serious issue at stake here, Safety. These Pipelines need specialized safety interventions which is only possible when there is a single owner. Else, India may also land up in a Nigeria kind of situation where frequent fires due to Pipeline leak, have wreaked havoc. The Refineries Division of these PSUs are either located in the hinterland (maybe due to political compulsions) which entail incurring transport costs for crude placement and product offtake or have old technology and thus are less profitable. The Marketing Division is also not able to make profits as it is dependent on Government dictated Pricing, Market conditions and Offtake by Customers. In fact, due to this glaring difference in Profits many Pipelines are attached to their captive Refineries for financial reporting. Thus, these PSE Pipelines have long become the cynosure and prime subject of takeover attempts by Private Oil & Gas giants. Here is a readymade infrastructure which is highly profitable. So many private players want to either take them over completely or at least share them. These attempts had hitherto met with limited success. Just as the Aviation fuel storage and supply was taken over successfully by the private players, Pipelines are the next target. It has become more of an immediate necessity since the PSE Oil OMCs domestic market domination has ended recently. Some statistics point out that from 51% Market share of a single Oil PSE, it has now come down to 40% for the entire sector. Earlier the private companies were engaged in Exports and domestic market was a given a pass over. The conditions have now changed. Reliance and Nayara Energy are aggressively moving into OMC business in India.
For the common man, it’s important to note that traditionally Pipelines have been considered as Natural Monopolies. These monopolies become so due to high startup costs and significant economies of scale. They are usually governed by market conditions and do not constitute any unfair business practice but do have strict regulatory conditions. The Private Oil OMCs have never invested in laying cross country Pipelines. They bet on other means of transport, even ultra large tank trucks as alternate means. But it appears that the roads in India, cannot support these large bowsers. However, that never prevented them from crying hoarse about level playing field. Now their prayers seem to have been answered. It’s a dream has come true. Although some oil & gas veterans believe it is a hostile takeover of a rather ‘defenseless’, government entity. In the din, the first mover advantage principle is also being overlooked. Pioneers are always promised attractive deals for taking the initial risks but that seems to have faded away with time. The fact is that this particular Pipeline is owned by a government PSE and has served the country from its commission in 1966 with distinction, when most of the current private Oil & Gas companies did not even exist. It clearly shows the foresight of the government as well as the PSE. It generated jobs for thousands in the various states it passed through and changed the landscape. It has had mostly a record of 100 percent utilization and thus using it as common carrier seems to be a contradiction. So why choose BKPL when it would hardly have any spare capacity? Unless of course, policy makers have a different intention altogether. The investments, safety, environment protection, experienced manpower, ownership of right of way, synergy all seem to have been kept on the shelf. It simply does not make business sense; many Oil & Gas veterans say. Forget all this, the upheaval which this unprecedented move will make will disturb even the civic society. Policy makers in India must understand that creating value and creating wealth are two different things or else it will forever remain developing. Furthermore, as this particular PSE stands, its Pipeline vertical makes the maximum profits. Seasoned Businessmen know that dismembering a vital, profitable vertical can be suicidal for a company.
The very structural foundations get disturbed. Experts also feel that reducing the efficacy of the Pipelines can be a strategic move to ultimately divest the company as a whole. Oil & Gas industry is a strategic one for any nation. Energy security is of paramount concern today. Many prominent countries have not done away with government ownership of energy industries. Wars, natural calamities, pestilence etc. are events where the so called “Charity” vis a vis “Business” equation meets the crossroad. Nations, for their own welfare, have to hedge their bets carefully especially in these uncertain times. Rocking the boat without fully understanding the outcomes can be a huge, huge mistake. Chaubey gaye chabbe banne dube banker laute wala kissa na ho jaye.
BKPL originates in the state of Bihar, which readers know, is due for Elections. Those in the decision making circles are full aware of it. For this venerated PSE Pipeline, it could well be a case of Karoshi!
A question mark on participation of Indian private oil companies in nation building ?
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