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For OIL, battle of Numaligarh is half won

New Delhi, Sept. 23: The petroleum ministry has cleared the decks for Oil India Ltd (OIL) to increase its stake in Numaligarh Refinery Ltd (NRL) from 12.35 per cent to 26 per cent. Although this will enable OIL to have a greater say in NRL, the management control of the refinery will continue to be with Bharat Petroleum Corporation Ltd (BPCL).

Sources disclose that the high-level meeting chaired by petroleum secretary B. K. Chaturvedi has decided to allow OIL to become an integrated oil company and move into the downstream refining and marketing business like Oil and Natural Gas Corporation has with the acquisition of the Mangalore Refinery.

To start with, OIL will pick up the Oil Industry Development Board’s 12.34 per cent stake in the paid-up capital of NRL and another 1.31 per cent share from BPCL.

But BPCL will continue to hold an over 60 per cent stake in the paid-up capital of the refinery.

Although the decision falls short of the OIL demand to take over management control of NRL, it is considered significant as it recognises the fact that OIL could move into the downstream segment at an opportune time and puts it on the same footing as upstream oil giant ONGC.

The current thinking in the government is that since BPCL continues to remain in the public sector with the Supreme Court decision having stalled the disinvestment process, NRL will continue to remain “in safe hands”.

The refinery was born out of the Assam accord. Its location, though beneficial for the economic development of the region, is not ideal given the limited demand for petro goods in the north-east. The evacuation of its products poses a major problem.

Sources say that since Bharat Petroleum has a very good brand image and a strong nationwide marketing network, it is in a better position to market NRL products.

Since BPCL is a navratna company, it can also take quicker decisions as it enjoys more financial powers. This could prove to be a great help to Numaligarh Refinery.

OIL, on the other hand, is an upstream company and its area of core competence lies in oil exploration and production. “The decision has, therefore, been taken in the best interest of NRL,” a senior official told The Telegraph.

With a 26 per cent stake Oil India will be permitted a greater representation on the board of directors of the company and can gain more experience in running the downstream business, he added.

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