Not considering merger of oil firms into one entity: Govt

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Published on Jul 26, 2016 06:50 AM IST
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NEW DELHI: Officials in oil ministry clarified on Monday that the Centre is not in favour of merging the 13 state-run oil and gas companies under one umbrella.

“Oil ministry is not actively considering any proposal to merge state-run companies and their subsidiaries into one corporation. This will be anti-competitive,” an official in the ministry clarified.

What could be considered, he said, is merging smaller government companies under stress with the bigger maharatna company operating in the same sector. As an example, he cited the case of the proposal to merge Chennai Petroleum Corporation Ltd with Indian Oil.

A panel led by V Krishnamurthy had in 2005 advised the government against merging state oil firms, arguing that dominance of an ultra mega entity may not be good for competition in a developing economy that is starved for energy. The report batted in favour of smaller companies that specialise in each sector of oil and gas, from exploration and production to marketing. It had also argued that globally, less than a third of mergers had helped enhance shareholder value, mainly due to their inability to manage employees.

“E&P (exploration and production) firms and marketing companies could come under one umbrella to create a mega project,” oil minister Dharmendra Pradhan had said on Saturday. An oil ministry official said this should not be misinterpreted as a government initiative towards consolidating public sector oil companies into one entity.

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  • ABOUT THE AUTHOR

    Suchetana Ray covers aspects of the government’s economic policy. A news junkie, she is invested in HT’s ‘digital first’ policy.

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