The Sengupta Committee too has prescribed the merger of these refineries with oil marketing companies. The rationale for the suggestion is that we need strong integrated companies which can take on the competition, especially the foreign majors.

The objective is laudable, but not the way it is being sought to be enforced. The whole attitude of the government seems to be that it alone can decide which companies should combine. Surely that is a decision that is best left to the companies themselves? Perhaps the government's argument will be that since these are PSUs, the government as chief shareholder must take the decisions, to ensure that its interests are protected.

That is no doubt true, but the government's interest will best be served by inviting bids for the stand-alone refineries, and taking the highest bid. This is the way to maximise shareholdervalue for these refineries. Even if the bidder is itself a PSU marketer, it can be argued that the merger will benefit both, in spite of the high bidding. And if the government has compunctions about allowing foreign companies to get a toe-hold in the refinery sector, they can be excluded from the tender process. Not that excluding foreign companies makes much sense, given the benefits in terms of improved technology and competition which a foreign presence will bring.

Allowing the PSUs to restructure themselves is the best option. All that will happen if the government takes these decisions is that the restructuring will occur the way vested interests in the ministry want it, rather than on economic considerations.