The Telegraph
Since 1st March, 1999
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Aiyar clears air on petro behemoths

New Delhi, Aug. 26: Petroleum minister Mani Shankar Aiyar today told Parliament there is no formal proposal under the government’s consideration to create two mega players in the oil sector by merging the state-run petro firms.

Last week, the minister had a brainstorming session with the chiefs of the public sector oil companies and informally mulled the possibility of merging Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) with ONGC to create one big integrated company and clubbing downstream oil major Indian Oil Corporation (IOC) with Oil India Ltd to form the country's second petro giant.

Senior officials are of the view that the Indian oil companies are performing well and such a radical transformation, if it comes about at all, cannot be undertaken in haste.

There were serious objections from HPCL and BPCL on the merger issue as they are both earning huge profits and are among the top corporate tax-payers in the country. Clearly, ONGC was quite attracted by the idea as it nurses ambitions of entering the downstream oil refining and marketing segments. In fact, ONGC chairman Subir Raha is himself a former IOC hand who would love to take over blue-chip BPCL and HPCL.

Similarly, IOC is also keen to enter the upstream oil exploration business and acquisition of OIL would give it a quick breakthrough in this segment. In fact, IOC is currently gearing up to pick up a 40 per cent stake in an Indonesian exploration company. The due diligence exercise is expected to begin soon.

However, the government appears to be equally worried about these companies jumping into each other's areas of business and wasting national resources.

Petroleum ministry sources say the government is keen that each of these companies concentrate on their areas of core competence.

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