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Richa Mishra
Archana Chaudhary

New Delhi/Mumbai , April 18

WITH just a month to go before the Committee on Synergy in Energy submits its report to the Ministry of Petroleum, the industry is abuzz with the much talked about proposed mega merger of the oil firms to beat global competition.

Official sources told Business Line that the report is expected by May, which would then be studied by the Ministry. They, however, indicated that it might take some time before a formal decision is reached on the recommendations.

While favouring the merger proposal, exploration giant Oil and Natural Gas Corporation Ltd is believed to have suggested the creation of two integrated entities.

The first would comprise ONGC, Hindustan Petroleum Corporation Ltd, Bharat Petroleum Corporation Ltd and part of GAIL (India) Ltd (particularly its LPG and petrochemical projects), ONGC Videsh Ltd, Kochi Refinery Ltd and Mangalore Refinery and Petrochemical Ltd. The second entity would include Indian Oil Corporation, Oil India Ltd, Bongaigaon Refinery and Petrochemicals Ltd and Numaligarh Refinery Ltd.

This will not only create two balanced mega companies with interests in exploration, petroleum retailing and petrochemicals businesses, but will also allow ONGC to acquire half the retail market share together owned by HPCL and BPCL, industry insiders commented.

Feeling the need for oil public sector undertakings to leverage their strengths in their respective areas of core competence to optimally fulfil the key role envisaged for them in promoting the national objective of energy security, accelerated growth rate and sustained economic development, the Petroleum Ministry had proposed creating synergy in the sector. It had then set up an advisory committee to examine the core competence of petroleum PSUs and to assess their competitiveness in the evolving domestic and international scenario.

According to sources in ONGC, the company was in favour of integration of oil companies, as it would make the Indian companies more competitive in the global scenario. Further, it would also help in saving redundant costs, which the firms are incurring now, sources said. ONGC submitted its report before the committee in mid-March.

Apart from suggesting structural changes, the oil major has also suggested decontrol of prices, especially for petro-products. It has also proposed that the boards of these entities be given a free hand in day-to-day operations, with the Government restricting itself to policy-making.

Meanwhile, India's biggest oil retailing major IOC has recommended that the restructuring should lead to creation of three entities led by IOC, BPCL and ONGC. All three entities would be integrated oil and gas companies, with a presence in refining and petrochemicals, marketing and crude oil production.

Further, in its presentation IOC is understood to have proposed that GAIL could be a stand-alone gas transportation company and the gas marketing and distribution assets be given to IOC, BPCL and ONGC at a prescribed ratio.

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