The Hindu Business Line : Merger of oil PSUs not advisable, says panel

THE proposed monolith structure for oil sector by merging the state-owned oil firms has not found favour with the Advisory Committee on `Synergy in Energy'.

Stating that the merger of oil public sector undertakings (PSUs) was not advisable at present, the committee has suggested that the present structure of state-owned companies should be strengthened through policy changes and management and structural improvements.

For overseas operations it has suggested a formation of parallel new entity by Oil India Ltd for smaller ventures.

The committee has recommended a formation of National Shareholding Trust (NST) for the blue chip companies in the public sector, which will function as a non-profit trust, with greater autonomy to ensure synergy in operations.

To begin with, Navaratna and Miniratna oil PSUs may participate in NST.

The Board of the NST will comprise eminent personalities from the Government, public sector and private sector. The trust would ensure enhanced returns to all stakeholders.

Putting to rest any doubts on the character of the trust, the committee has said the oil PSUs that will join the trust would continue to retain the PSU character.

The six-member committee headed by Mr V. Krishanamurthy, today submitted its report to the Petroleum Minister, Mr Mani Shankar Aiyar.

Advising the Government against merger of any state-run firms, the report stated that any merger in the Indian context, which would result in reduction of manpower, might not be feasible.

Talking to presspersons, the Petroleum Minister said that his ministry would process the report in six weeks time.

For overseas venture, the committee has suggested setting up of a parallel new entity by Oil India Ltd.

"Intense competition in overseas bidding is to be avoided by fixing up a limit related to the production capacity of more than two million tonnes of oil equivalent per annum for ONGC Videsh Ltd (OVL), below which the other new entity would be permitted to bid," the committee has suggested.

The new entity may be called Oil India Videsh Ltd (OIVL).

For exploration and production activities, in case of successful overseas bidding, there may be no ceiling on investments for incorporating a company as subsidiary or joint venture company, according to requirement of the host country.

On the upstream companies, the committee has said that such entities need to segregate the non-core activities and form them into separate entities.

Overseas exploration and production activities should be pursued aggressively by targeting at least 15 per cent of crude oil imports through the equity oil route within next two-three years.

It has also suggested merger of existing standalone subsidiaries with parent companies, encouraging competition, technology upgradation, improving energy security, formulating integrated energy policy, creation of a cabinet committee on energy, setting up of a down stream regulatory body, and strengthening the institution of Directorate General of Hydrocabrons.

Noting the areas of improvement, the committee said that existing framework of supervision and overview by various agencies should be revamped to empower managements to face competition.

The Government may consider setting up a pre-investigation board to examine the impugned decisions of the company and classify them for being dealt with by the management or boards of the companies, and for reference to CBI.

The committee felt that it is necessary to unbundle the supply and transport services of GAIL.

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