The will provide India the muscle to acquire assets abroad and negotiate better, but the business model of the new entity thus created will be...
key to its success, points out chairman, Indian Oil Corporation, country’s largest oil marketing PSU firm.
“Energy is critical and strategic for the growth that India aspires for,” IOC chairman B Ashok told a leading financial daily after the finance minister’s announcement.
“Consolidation would help us strengthen, leverage and enhance our position more strongly in the international market. This will not happen overnight and we will have to work on different models, but it is the way forward,” Ashok told the daily.
Maharatna oil PSU Indian Oil is the top-ranking Indian company on the ‘Fortune 500’ list for 2016 at 161, with the other two state-run oil marketing companies also making it to the list.
The merged entity would be catapulted to the league of global majors such as BP, which has a market value of $115 billion.
“The top ranking energy companies on ‘Fortune 500’ are integrated players. While we are on the list, individually we are much smaller in scale. The merger would help scale and consolidate our position in the world,” he said. “An integrated company can absorb volatility much better.”
On concerns about a possible lay off after the merger of entity, Ashok said the government will have to work on a model that works best to leverage the strengths of these companies.
“The thought process for being consolidated across the value chain has been in place for a long time. IOC has believed in this model and has been working towards it. Simultaneously, we have been removing duplications in our operations and staff,” he said.
“Industry has grown a lot and those concerns are not relevant anymore. This is the right time for such a move,” he pointed out. The top eight PSUs together would have a market value of US dollar108 billion, which would surpass the US dollar 50 billion of India’s Reliance Industries and that of the US dollar 70 billion Russian major Rosneft, which is increasing its presence in India by buying stake in Essar’s refinery.