Oil PSUs integration may birth not one, but two entities; authorities planning VRS scheme

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Mumbai | Published: February 10, 2017 6:10:09 AM

The proposed restructuring of oil PSUs (public sector undertakings) — announced by the finance minster in his Budget speech — might result in not one but a couple of integrated entities, according to consultants working with the government on the project.

In the process of creating a new set of oilcos, there could be several senior employees without meaningful responsibilities and the government needs to address this issue, they explained. (AP)In the process of creating a new set of oilcos, there could be several senior employees without meaningful responsibilities and the government needs to address this issue, they explained. (AP)

The proposed restructuring of oil PSUs (public sector undertakings) — announced by the finance minster in his Budget speech — might result in not one but a couple of integrated entities, according to consultants working with the government on the project.

Meanwhile, the government is simultaneously working to rationalise the manpower at these companies, sources familiar with the development told FE.

“Some kind of a voluntary retirement scheme is being planned though the government will try and accommodate the career plans of over 40 directors across the oil PSUs,” the sources added.

In the process of creating a new set of oilcos, there could be several senior employees without meaningful responsibilities and the government needs to address this issue, they explained.

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In his Budget speech, finance minister Arun Jaitley said the government sees opportunities in strengthening central PSUs through consolidation, mergers and acquisitions.

“Possibilities of such restructuring are visible in the oil and gas sector. We propose to create an integrated public sector ‘oil major’ which will be able to match the performance of international and domestic private sector oil and gas companies,” Jaitley had said.

However, rather than merging all oil PSUs into one entity, the government may explore the idea of creating two or three entities, each one with both upstream and downstream capabilities.

“The government has hinted it is open to completely divesting the marketing arm of either BPCL or HPCL or both via a strategic sale,” another source at a consulting firm said.

Given both domestic and international players are keen to participate in the oil and gas sector, the government is hopeful of one large pay-out from the sale.

“The plans are highly ambitious, but the government seems to be of the idea that if it can materialise even a third of its plans, the oil & gas sector in the country will get a huge boost. Its also has plans to push these new entities to get in to high-end coal liquefaction etc,” the consultant added.

Meanwhile, the government is seeking the views from senior officials at the Reserve Bank of India (RBI) as also economists like Kirit Parikh and Vijay Kelkar. “Consulting firms including BCG Partners and McKinsey have already started working on the possible restructuring,” a senior official in an oil marketing company said.

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