New Delhi, Aug. 5: The Oil and Natural Gas Corporation (ONGC) has informed the petroleum ministry that it wants to pick up the entire 17 per cent stake in Mangalore Refineries and Petrochemicals Ltd (MRPL) held by Hindustan Petroleum Corporation Ltd (HPCL).
The government intends to put HPCL on the selloff block soon.
Sources in ONGC told The Telegraph that while there was no problem with a member of a sister public sector undertaking sitting on the MRPL board, it would be a different ballgame altogether when HPCL passes into private hands.
Senior officials said that the private sector company would be competing with ONGC in the market, on the one hand, and at the same time by virtue of its representation on the MRPL board be privy to the entire strategy and planning for ONGC’s downstream business. There would be a conflict of interest which would prove disastrous for ONGC's foray into the downstream refining and marketing segment.
The government is reported to have told HPCL to reduce its stake in MRPL to below 15 per cent from the 17 per cent that it holds at present. However, this is seen merely as a move to help the new company acquiring HPCL to circumvent a Sebi rule that would make it mandatory for it to make an open offer for MRPL as well.
If the stake is less than 15 per cent in this joint venture, then the new company will not have to make any open offer and this will help acquirer save funds. There can be no benefit to ONGC in this exercise as it wants to manage the company free of the fetters that a private company with a vested interest would introduce.
With the recent acquisition of the shares held by financial institutions, ONGC now owns a 71 per cent stake in the refinery. The national oil major would like to take over the entire MRPL stake so that it becomes its wholly owned subsidiary. This will also entitle ONGC to tax benefits on account of the accumulated losses of MRPL.
MRPL is a state-of-the-art refinery and ONGC has already started turning it around after it acquired the AV Birla Group stake. The turnover of the company has gone up by 12 per cent in the first quarter of the current fiscal compared with the same period of the previous year and the net loss has been reduced to Rs 86 crore from Rs 117 crore earlier.