Govt for 33% independent directors in oil PSUs

The petroleum ministry has again raised the issue of pruning the mandated number of independent directors on the boards of listed public sector oil companies from 50 per cent to 33 per cent.

The ministry has approached the market regulator, Securities and Exchange Board of India (Sebi), with a proposal for relaxation of the rules.

"A board comprising 33 per cent independent directors is good enough," said a senior petroleum ministry official, adding that company boards with 50 per cent independent directors become "too crowded".

"There are also various levels of checks for the public sector companies," the official added.

The Ministry of Corporate Affairs also favours that one-third of boards should comprise independent directors.

Clause 49 of the listing agreement for stock exchanges, which came into effect on January 1, 2006, stipulates that listed companies fill 50 per cent of their boards with independent directors if they have an executive chairman and one-third if they have a non-executive chairman.

Outgoing Sebi Chairman M Damodaran had earlier this year said that the Clause 49 norms would not be relaxed for the public sector companies. An official with an oil company said the proposal may find favour with new Sebi Chairman CB Bhave.

The upcoming initial public offer of Oil India Ltd (OIL), which was to offer its shares this month, has been held up as the company's parent ministry has not yet appointed the requisite number of independent directors on its board. The independent directors have to be appointed for Sebi to clear the public offer.

None of the other government-owned oil sector companies listed on the stock exchanges are Clause 49 compliant. Oil and Natural Gas Corporation (ONGC) has four independent directors out of the board strength of 15 directors.

Indian Oil Corporation (IOC) has six independent directors in a board of 16, Hindustan Petroleum Corporation (HPCL) and Bharat Petroleum Corporation (BPCL) need three more independent directors to meet the Clause 49 norms.

GAIL, in its 11-member board, has three independent directors, and the terms of all of them expired over a year ago.

Other public offers by government-owned power companies National Hydroelectric Power Corporation (NHPC) and Rural Electrification Corporation (REC) have also been delayed for the same reason. The two companies were to offer shares to the public in April last year.