New Delhi, Sept. 5
AVID followers of corporate wars are seeing another interesting battle with a major spat breaking out in the public sector as well.
The Chairman and Managing Director of the state-owned company, Oil and Natural Gas Corporation (ONGC), Mr Subir Raha, and the Ministry for Petroleum and Natural Gas have locked horns over the number of Government nominees on the board of the company. Mr Raha has put it on record that he would quit if the Government forced more nominee directors on the company's board. ONGC's board meeting is scheduled for September 21.
Sources in the know of developments claim that the issues raised by Mr Raha were on grounds of principle. The trouble started when the Government nominated two more directors to the company's board, over and above the three already there, thus, taking the strength to five. Most other oil companies such as Indian Oil Corporation (IOC) have a maximum of three Government nominee directors.
Mr Raha has expressed concern over the move to nominate the Director General of Hydrocarbons (DGH), an upstream regulator, on the board, saying that it would lead to conflict of interest. The Petroleum Ministry, on the other hand, has been maintaining that the DGH was not a regulator in the statutory sense, as it did not take suo motu cognisance but only took up cases referred to it by the Ministry.
ONGC sources do concede that Mr Raha may be forced to quit if he continues to resist the Petroleum Ministry's proposal to appoint two Government directors to the company's board. Explaining the Government move, they said the Government wanted more control over ONGC. Mr Raha had shot a letter to the Petroleum Minister, Mr Mani Shankar Aiyar, on August 27, raising the issue.
The Ministry wanted the issue of new directors to be part of the company's annual general meeting (AGM) agenda. Mr Raha had opposed the appointment of new directors because ONGC already has three Government nominees.
According to sources, the Ministry, which holds 74 per cent shareholding in ONGC, might vote for his resignation at the AGM once it was able to push through the appointment of two additional directors on the ONGC board.
Meanwhile, the Petroleum Ministry has also initiated inter-ministerial consultations to get a proper perspective of the issue. The Ministry is understood to have sought the views of the Law Ministry about the possible Government strength on the board of public sector oil companies. According to official sources, views of other ministries have been sought on how many Government nominees can be on board of such companies.
The Petroleum Ministry has been discussing the issue with the Finance Ministry as well and Mr Aiyar recently met the Finance Minister, Mr P. Chidambaram, to discuss the board composition of oil companies, particularly ONGC. The two had also discussed the role of the Finance Ministry nominee on the ONGC board.
Mr Aiyar had also sought the Finance Minister's view on the composition of ONGC board with reference to the strength of independent directors.
With the SEBI setting December 31, 2005, as the last date of compliance with the revised Clause 49 of the Listing Agreement, which stipulates that 50 per cent of the members on a company's board should be independent directors, the PSU boards may have to undergo change in composition.
At present, the ONGC board comprises four nominee directors (including the IOC nominee), three Government nominees (two from Petroleum and one from Department of Economic Affairs), the Chairman, Director (Finance), Director (Human Resources), Director (Offshore), and Director (Onshore). Two posts of functional directors are still vacant.