Min­istry hires Deloitte for oil PSU merger

Business Standard - - FRONT PAGE - SHINE JA­COB & JY­OTI MUKUL

The pe­tro­leum min­istry has ap­pointed con­sul­tancy firm Deloitte to work on a pro­posed merger of pub­lic sec­tor com­pa­nies un­der its ad­min­is­tra­tive con­trol.

Fi­nance Min­is­ter Arun Jait­ley had in this year’s Bud­get speech pro­posed an in­te­grated state-owned oil com­pany.

“There could be more than one in­te­grated oil com­pany. The idea is to in­su­late com­pa­nies from price fluc­tu­a­tions. Deloitte has been asked to come up with a re­port in three months and an ac­tion plan for one year,” said a source close to the de­vel­op­ment.

While Pe­tro­leum Min­is­ter Dhar­men­dra Pradhan has left it to the com­pa­nies to de­cide on the merger, of­fi­cials said a meet­ing for an ac­tion plan was re­cently held in the Prime Min­is­ter's Of­fice.

In­dia has 18 state-owned pe­tro­leum com­pa­nies, in­clud­ing In­dian Oil Cor­po­ra­tion, Hin­dus­tan Pe­tro­leum Cor­po­ra­tion, Bharat Pe­tro­leum Cor­po­ra­tion, Oil and Nat­u­ral Gas Cor­po­ra­tion, Oil In­dia Ltd and GAIL.

Merger talks are on be­tween IOC and OIL. Ved Prakash Ma­hawar, di­rec­tor (on­shore), ONGC, said re­cently that talks were on at the min­istry for ONGC to ac­quire HPCL.

Oil re­fin­ers are com­fort­able with low crude oil prices be­cause the sub­sidy on kerosene and cook­ing gas re­mains in check. But be­low a cer­tain point, oil pro­duc­ing com­pa­nies like ONGC and OIL are af­fected be­cause their prices are bench­marked to global crude oil prices.

The idea of in­te­grat­ing state-owned oil com­pa­nies was first mooted in 2005. This Fe­bru­ary, Jait­ley re­vived the pro­posal. Ac­cord­ing to the fi­nance min­istry, the move will en­able oil com­pa­nies to bear higher risks, ac­quire scale, make big­ger in­vest­ments and cre­ate more value for stake­hold­ers.

“We are not new to merg­ers and ac­qui­si­tions. It is worth look­ing at op­por­tu­ni­ties,” IOC Chair­man B Ashok said last week.

In­dian Oil Cor­po­ra­tion has in the past taken over the Bon­gaigaon re­fin­ery and Indo-Burma Pe­tro­leum. Ashok also hinted that the merger of Chen­nai Pe­tro­leum Cor­po­ra­tion with IOC was in­evitable.

“The ac­qui­si­tion of Chen­nai Pe­tro­leum Cor­po­ra­tion may not be easy as the com­pany has a stake held by Na­tional Ira­nian Oil Com­pany. A merger will lead to Na­tional Ira­nian Oil Com­pany com­pany hav­ing a stake in In­dian Oil Cor­po­ra­tion. It is a com­plex is­sue,” an IOC ex­ec­u­tive said.

RS Sharma, for­mer ONGC chair­man, said form­ing a hold­ing com­pany would be a bet­ter op­tion for the in­dus­try. “It should be a ver­ti­cal merger rather than a hor­i­zon­tal one. A merger be­tween ONGC and HPCL or BPCL should hap­pen, rather be­tween ONGC and Oil In­dia,” he added.

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