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It is not for the first time that a discussion on mega merger of public sector oil and gas companies is taking place.
In 2005, a discussion on proposed monolith structure for oil sector by merging the state-owned oil firms did not find favours with an Advisory Committee on ‘Synergy in Energy’ constituted by the then government. Of course, one of the proposals then was to have two giants one led by Indian Oil Corporation and another by ONGC.
Advising the government against merger of any state-run firms, the Committee had stated that any merger in the Indian context, which would result in reduction of manpower, might not be feasible. It had suggested that the present structure of state-owned companies should be strengthened through policy changes and management and structural improvements.
Not much seems to have changed since then. Analysts believe that the implementation of such a merger remains a concern specifically getting the minority shareholders on board.
SC Tripathi, former Secretary in the Ministry of Petroleum & Natural Gas, who was part of the Ministry when the discussions were at their peak, said, “I am not in favour of creating a single monolith…examples are in front of use in SAIL and Coal India Ltd. A mega entity will also cover the inefficiencies. I feel, a better option is to have two or three large entities, which can not only compete in the global market but also protect risks.”
Analysts, however, agree that a mega merger could lead to quicker decision making and better utilisation of infrastructure.
“A merger of 13 large firms is not an easy task. Minority shareholders would need to be convinced and it may require some legislative changes too. One of the big concerns of such a merger will be the manpower integration. While upstream and downstream firms can operate in separate verticals, downstream firms like Indian Oil Corporation, Hindustan Petroleum Corporation Ltd and Bharat Petroleum Corporation have a large workforce who would not be very keen on a merger,” the analyst said.
A former Petroleum Ministry official on conditions of anonymity said, the arguments put forth for proposing such a move of creating better utilisation of infrastructure, can be done without merger itself.
For example the three PSU refiners – Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation – can optimise their resources. Also, by creating a monolith the government will be killing competition.
Energy Expert, Narendra Taneja, told BusinessLine, “with the threat of higher crude prices looming large on horizon, this is not the right time to discuss such a merger. Instead these PSUs should be equipped to handle and deal with the fast emerging new global geopolitical and market challenges first and foremost.”
Taneja further added, “whether we like it or not, most oil PSUs enjoy their own unique DNA and a very unique work culture…for instance, ONGC and Indian Oil have almost nothing in common in terms of their overall work culture. Therefore, any proposal to merge all into one supership must be thought through very, very carefully first.”
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