• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

Stocks

• Quotes
• SE Diary
• Scoreboard
• Open-End Mutual Fund

Cross Currency

• Rates
  
  

Shipping

• Ports
  
  

Archives

• Yesterday
• Datewise
• Resources

Group Sites

• The Hindu
• Business Line
• Sportstar
• Frontline
• The Hindu eBooks
• The Hindu Images

Balaji C. Mouli

New Delhi , Aug. 28

OIL and Natural Gas Corporation (ONGC) is considering setting up of a trust to operate its retailing operations for transportation fuels. In the trust, ONGC plans to hold 50 per cent, with the rest being held by individuals and company employees.

The oil and gas exploration major sees this as a solution to overcome the hurdle posed by the Petroleum Ministry. The Ministry had recently turned down its board proposal to set up a joint venture to market transportation fuels as well as operate its shipping business.

It was turned down on the grounds that ONGC would hold only 49 per cent in the joint ventures.

"We have had this option examined by legal experts and they do not see any problem in this arrangement. Initially, the trust can be kick-started with an amount of Rs 5 lakh only. A decision to go ahead with this proposal has not yet been taken," a senior ONGC official said.

In the case of an arrangement where ONGC holds only 49 per cent, the Ministry argued that such joint ventures are not bound by mandatory checks of public sector watchdogs such as the Central Vigilance Commission given the joint venture's non-public sector status.

The company is unrelenting in its bid to set up an operation where it does not hold majority stake since only such a joint venture company can undertake quick investment decisions that cannot await procedures that public sector undertakings (PSUs) are mandated to follow.

This is a necessity in the case of the retailing business as ONGC reckons that the joint venture would enable the company to compete with the private sector on an even keel in matters such as purchase of real estate for setting up of retail outlets.

As part of the twin proposal, ONGC had also mooted a proposal to lease its shipping assets to a joint venture company consisting of shipyards and service firms, both in the public and private sector.

The joint venture would, in turn, `wet lease' it back to ONGC, that is manage the assets as well as operate it for the exploration major — a business worth around Rs 500 crore per annum.

On the marketing front, ONGC was granted a licence in May 2002, to set up 600 retail outlets.

This business has yet to take off and the Government last month indicated to ONGC that it would be prudent for the exploration company to go about its retailing business through its refinery subsidiary, Mangalore Refineries and Petrochemicals Ltd (MRPL).

With the Government now concerned about the diversification forays by the oil sector companies into businesses where they do not enjoy core competence, ONGC's plans to enter the retailing business may run into rough weather.

In a recent report, the Petroleum Ministry has argued that the company should desist from entering the petro-marketing business as their core competence lies in exploring oil and gas.

The ONGC Chairman and Managing Director, Mr Subir Raha, had, however, recently opined otherwise on the grounds that such forays would reduce the business risk perceived by the company.

For instance, the marketing margins would not pare when the crude oil prices soften in the global market resulting in lower returns in the exploration business.

More Stories on : Petroleum | Announcements | Supply Chain Management | Petroleum

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Dhunseri plans to remove Lodhas

Copyright © 2004, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line