Chandrasekaran Ramadurai FCA
A quick look at the facts
Some points to analyse:
1. Original Notification allowing FDIs was Notification No. FEMA 20 /2000-RB dated 3rd May 2000. The automatic route permission was under Annexure B where entry 6 Mining was allowed only up to 74 %. In February 2016, this notification was amended and an amended Notification No.FEMA.362/2016-RB dated February 15, 2016 was issued. This included 100 % under automatic route to companies in private sector engaged in exploration and Govt owned companies up to 49% ( if HPCL or BPCL/OIL/ONGC were to be privatised, only up to 49 % is allowed):
|4.||Petroleum & Natural Gas|
|4.1||Exploration activities of oil and natural gas fields, infrastructure related to marketing of petroleum products and natural gas, marketing of natural gas and petroleum products, petroleum product pipelines, natural gas/pipelines, LNG Regasification infrastructure, market study and formulation and Petroleum refining in the private sector, subject to the existing sectoral policy and regulatory framework in the oil marketing sector and the policy of the Government on private participation in exploration of oil and the discovered fields of national oil companies.||100%||Automatic|
|4.2||Petroleum refining by the Public Sector Undertakings (PSUs), without any disinvestment or dilution of domestic equity in the existing PSUs.||49%||Automatic|
2. This way Rosneft PJSC and the consortium of Trafigura and UCP have acquired 49.13% each in Essar Oil, with the rest distributed among retail shareholders. Essar’s promoters, the Ruias, will hold 2% in the Trafigura-UCP consortium
3. Out of the total debt of Essar of Rs 1.3 trillion, only Rs 70,400 crores will get partly paid and partly taken over by the new EOL.
4. No new FDI inflow into the country. Though the deal is touted as the biggest foreign direct investment in India and Russia’s biggest outbound investment, it will immediately not lead to fresh investment flow. The transaction will bring down the Essar group’s debt by Rs 70,000 crore, to Rs 40,000 crore, and end plans to sell assets to pare debt.
5. The deal was signed at the BRICS meet. Signed by PM Modi and Russian President Putin. – There is no immediate information on the involvement of BRICS Bank headed by KV Kamat, ex-Chairman of ICICI Bank whose exposure has come down by half.
6. This transaction reduces ICICI Bank’s exposure to the Essar group by about 50%,” said Chanda Kochhar, managing director and chief executive of the private lender.
This is like passing book entries.
(Author can be reached at [email protected])