Mamata Banerjee Government’s plans to divest its holding in the ailing Haldia Petrochemicals Ltd. (HPL) have run into trouble with Indian Oil Corporation (IOC), the lone bidder in the auction process initiated by the government last year, indicating its intention to withdraw from the process.

An IOC official said the public sector company was keen to withdraw the earnest money that it had deposited with the government to participate in the bid. A few other energy and petrochemical companies withdrew from the process after showing some initial interest.

The development is linked with the dispute that arose between HPL’s two main promoters, The Chatterjee Group and the West Bengal Government, which holds the shares through its apex industry promotion agency West Bengal Industrial Development Corporation, mainly. Some preference shares are held by other state agencies such as West Bengal Industrial Infrastructure Development Corporation and West Bengal Industrial Development Finance Corporation.

The quarrel was over the ownership of some 155 million shares amounting to a 9 per cent stake. While the Mamata Banerjee Government put this portion on the block too, Purnendu Chatterjee, who controls TCG, disputed it, saying that the shares were rightfully his through a prior agreement (they were, however, never transferred due to a squabble that dates to the previous regime).

Mr. Chatterjee has now taken the entire matter to the International Court of Arbitration in Paris, and IOC feels that this will delay the entire matter, reducing them to minority equity shareholders should the TCG group win. IOC now has an 8.9 per cent share holding while TCG has a 40.8 per cent undisputed holding.

Financial institutions were given a 7.5 per cent stake in 2011-12 through a loan-to-equity conversion to avert a mandatory reference to the Board for Industrial and Financial Reconstruction.

Since then, the cash-strapped HPL’s performance has slipped further, and it has had to make a BIFR reference as a potentially sick company.

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