The Supreme Court's judgement halting the divestment of oil majors, BPCL and HPCL, is likely to cause irrecoverable damage to the divestment process of these two public sector units, say analysts.
In its judgment the Supreme Court has asked the Centre to get approval from Parliament before going ahead with the sell-off.
This means that the government will have to introduce a Bill in the Parliament and will have to ensure it is passed before the divestment process for the oil PSUs can be taken up again.
"To say the least, the divestment process is doing to be delayed immensely. At the earliest, getting the Parliamentary nod could take six to eight months. But most likely it will be taken up only after the elections, which are scheduled for next year," says Karthik Ramakrishnan, an analyst with Sunidhi Consultancy Services, who has been tracking the divestment process of the oil PSUs.
The government has not yet indicated if it will take up the issue during the winter session of the Parliament.
The due diligence process of HPCL was initially expected to be completed by October 10. After the Supreme Court's judgment, the government has put a halt to the process.
Analysts say that even taking a guess on whether Parliamentary nod will be granted is impossible at this stage.
"Once this has entered the realm of politics it is difficult to make an estimate on how long it will take. All depends on the political equations and the situation," says Jamshed Desai, an analyst with Taib Securities.
With a few state elections scheduled during November/December, Desai feels that the issue could become politically charged when introduced in the winter session of Parliament.
In that scenario, though the government, again a coalition of parties, could summon a majority in the Lok Sabha, it just does not have a majority in the Rajya Sabha.
"Unless the Congress co-operates there is no way that the Bill if pushed through the Lok Sabha can be passed in the Rajya Sabha. Whether the Congress will co-operate or not is quite unclear. As of now, the Bill is unlikely to be passed in the Rajya Sabha," says Ramakrishnan.
Much then depends on the return of the Bharatiya Janata Party to power and with a powerful majority. In case, the Congress comes to power at the Centre, it is unclear if it will revive HPCL/BPCL divestment.
But what is important is that either of them have a strong majority in both the Houses of Parliament.
"All depends on the political situation of the government which comes back to power. If it is Congress, then BJP will start picking holes in the process and if it's the BJP then the Congress and the other parties will oppose it. So to push it through, a majority is essential," says an analyst with a brokerage firm.
The stock market has reacted sharply to the Supreme Court's judgement with share prices of HPCL and BPCL crashing.
Analysts says that it is unlikely that HPCL and BPCL shares will experience greater losses on Wednesday.
"It has crashed significantly today (Tuesday). There's not much to go down from here. At the most it may go down another 5-6 percent tomorrow. But the market is likely to look at HPCL and BPCL as just another oil company henceforth. The divestment will not be factored in into valuations anymore," says Desai.
Despite, developments analysts have accepted the Supreme Court's judgment graciously.
The main line of argument of the petitioners -- which was accepted by the Supreme Court -- was that the government should have approached Parliament as these two companies were acquired by it in 1974 through a parliamentary legislation.
So to uphold the Parliamentary norms of governance, it should have approached it with a Bill either to repeal the nationalisation Act or modify it suitably to permit divestment through an executive order.
However, the government had taken an opinion from the Attorney General Soli Sorabjee, who deemed that a Parliamentary approval was not necessary, and only then gone ahead with the process.
"The Supreme Court has held that since HPCL was created by an act of the Parliament it is necessary to ask for its approval. The sell off is being done for economic gain and not because there is a national emergency. So, I think its only fair that the government be asked to go back to Parliament and get its approval," says the analyst with a local brokerage firm.
What has emerged clearly though is that the judgment has set back the divestment process of these two PSUs for a long time to come.
"The key issue is the delay this has introduced into the process. The market is concerned that it will take just too long. There is a hell of a lot of certainty regarding the process now," says Desai.