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Privatisation will hurt India's oil supply, says Naik

Petroleum Minister Ram Naik said on Thursday he opposed the strategic sale of government equity in state oil firms, to ensure smooth supply of fuels to the public and to encourage more investment.

Naik led a storm of protest against privatising two large refining firms and persuaded a Cabinet panel in September to defer the privatisation of Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd by three months.

On Wednesday, Prime Minister Atal Bihari Vajpayee said the government's privatisation programme was not dead although its policies were open to debate.

"I do feel that the strategic sale of HPCL and BPCL should not be done ... because the country needs assured supply of hydrocarbon fuels," Naik told reporters.

Asked if private firms were incapable of supplying fuels reliably, he said: "That has been the past experience." He did not elaborate.

Private firms operated in India's oil retailing and refining sector some three decades ago, but were nationalised by the government.

Private firms are eyeing stakes in HPCL and BPCL as the two firms together have a 40 per cent share in India's lucrative retail market for oil products.

Naik said new players should invest in new infrastructure.

"By divestment, no additional assets are created," he said.

He said private firms had been granted permission to set up more than 8,000 petrol stations in addition to some 19,000 operated by state firms.

"This will create competition," he said.

HPCL, BPCL and the country's largest refiner, state-run Indian Oil Corp now control the entire retail market for petrol and diesel in India.

Reliance Petroleum, which operates a 540,000 bpd refinery at Jamnagar, state exploration firm Oil and Natural Gas Corp and Essar Oil, which is setting up a refinery, have been allowed to set up petrol stations, which are expected to open in a year's time.

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