Oil PSUs merger: Dharmendra Pradhan bats for it

Petroleum minister Dharmendra Pradhan

UNION Petroleum & natural gas minister Dharmendra Pradhan has batted for the merger of state-owned oil firms saying it could create synergy and boost efficiency. He adds that the idea is worth discussing. “Both ONGC and OIL (the exploration companies) are taking a hit on profits. The issue had recently been flagged by a director of one of the PSUs that it was in the interest of the E&P firms...
to get merged with the oil marketing companies. There is nothing wrong in discussing the issue within the ministry,” he said in Kolkata.
The proposal was mooted by the country’s largest oil and gas exploration firm, ONGC, in a bid to creating a huge firm which will bring upstream, downstream, transmission and engineering businesses under one umbrella. Though the idea is in its initial stages and any formal consultation between the companies is yet to begin, the ministry is ‘willing’ to deliberate on the proposal.
A top official at the oil ministry was quoted as telling a financial daily that it’s indeed a ‘unique thinking’ and the government is open to discuss it, if it helps the country move towards energy security.
“The ministry would not interfere. It is for the companies to decide if they want to merge into one giant entity…” he said.
Currently, the government-owned energy firms are smaller in size compared to their global peers. For instance, ONGC’s market capitalisation stood at $28.18 billion on Friday, while it reported turnover of $19.77 billion in the last fiscal.
Similarly, IOC has market capitalisation of $19.79 billion and it reported turnover of $54.19 billion last year.
The Cabinet Secretariat has also proposed to merge 13 oil PSUs into one behemoth. The proposal is in fact still in the realm of ideas and the ministry of petroleum and natural gas is yet to start working on it.
Experts suggest if such an exercise was to be taken up, it would involve many legal and organisational challenges. It may take longer than the tenure of the present government, quipped an expert. Petroleum Minister Dharmendra Pradhan would not be the first to face such a challenge. Even an indomitable Mani Shankar Aiyar had to beat a retreat, ostensibly on the recommendations of V Krishnamurthy’s Synergy in Energy panel in 2005, after he attempted to create a large, high-value entity a year before.