To privatize BPCL, the government relaxed the rules on foreign investment

The door to oil companies and foreign investment is open

An administrative order will be issued to change the approval limit for 100 per cent FDI in oil refineries

New Delhi: The Union Cabinet today approved a proposal to increase the foreign direct investment (FDI) limit in public sector oil refineries to 100 per cent. This has cleared the way for foreign investment in the privatization of Bharat Petroleum Corporation (BPCL).

Following cabinet approval to increase the FDI limit, the government will be able to sell its 52.98 per cent stake in BPCL to a foreign buyer. This will also open the door to foreign investment in public sector oil companies.

"In-principle approval for strategic disinvestment of state-owned oil and gas sector companies will automatically allow 100 per cent FDI under the route," government sources said.

Under the current FDI policy, 49 per cent foreign investment can be allowed in public sector refining companies and 100 per cent FDI is allowed in private sector companies. Under current policy, only 49 per cent FDI can be allowed in public sector oil companies through the automatic route.

In such a scenario, foreign companies will not be able to bid for public sector oil companies as they are not allowed to invest more than 49 per cent. But with the increase in the AFDI limit, foreign companies will now be able to bid. The change in FDI limit will be done by an administrative order and the law will not have to be amended for this.

The Department of Industrial Promotion and Internal Trade (DPIIT) will issue the order in the form of a press note, law experts said. The declaration under the Foreign Exchange Management Act (FEMA) will be issued after the press note of DPIIT. No official announcement has been made yet about the decision to increase the limit on foreign investments.

The transfer of ownership to public sector oil companies necessitated a change in FDI norms, as most of the companies that have shown interest in buying BPCL have foreign investment. The move will also help the government in privatizing other public sector oil and gas companies.