Govt mulling oil firms' merger again

The government is again thinking of having just 2-3 large oil PSU companies in India.

This means that some of the government-owned, smaller refining and marketing companies will be swallowed by giant state-owned oil companies.

"The government has decided to work more on deregulating the downstream petroleum sector, particularly the refining and marketing segment. This is particularly to strengthen the oil sector so that eventually there is vertical integration of the oil companies and only two to three large integrated oil companies emerge," B K Chaturvedi, secretary in the ministry of petroleum and natural gas, said on the sidelines of a media conference in Mumbai yesterday to launch the ONGC roadshows.

The government's current thinking is based on a proposal by former petroleum secretary Vijay Kelkar who had mooted the merger of oil and gas companies to form three oil majors in the country.

Chaturvedi said the oil companies had been given time to seek forward or backward integration. While ONGC has entered refining and marketing by acquiring Mangalore Refineries and Petrochemicals Ltd, Indian Oil Corporation (IOC), Hindustan Petroleum Corporation Ltd (HPCL) and Bharat Petroleum Corporation Ltd (BPCL) have entered exploration.

Explaining the rationale, Chaturvedi said too many national oil companies existed in the marketing arena. The government has, in fact, okayed ONGC's proposal to set up 1,100 retail outlets and that of its subsidiary, MRPL, to set up 500 outlets.

Even Numaligarh Refineries, a BPCL subsidiary, has received government approval to set up 400 retail outlets to market its transportation fuels across the country.

"Once the disinvestment policy or process for HPCL and BPCL is clear after the Supreme Court rules on the matter, we will think on a long-term basis to vertically integrate the companies," he pointed out.

Chaturvedi said the restructuring might be similar to the stand-alone refineries, which were given to refining and marketing companies.

Chennai Petroleum Corporation and Bongaigaon Refinery and Petrochemicals Ltd were given to IOC, and Kochi Refineries was given to BPCL.

With the successful decontrol of the oil sector, next on the agenda for the government would be to have in place a Petroleum Regulatory Bill and a national gas policy. Chaturvedi said the government was keen on getting the gas policy on stream since the availability of gas would go up by at least 40 per cent by December 2004.

Big oil

• The government has decided to work more on deregulating the petroleum sector
• The plan is based on a proposal by former petroleum secretary Vijay Kelkar
• Oil companies have been given time to seek forward or backward integration