State-run HPCL will remain a central government public sector enterprise (CPSE) having a distinct brand identity and cultural uniqueness even after it becomes a subsidiary of national oil explorer ONGC, oil minister Dharmendra Pradhan told the Lok Sabha on Monday.
State-run HPCL will remain a central government public sector enterprise (CPSE) having a distinct brand identity and cultural uniqueness even after it becomes a subsidiary of national oil explorer ONGC, oil minister Dharmendra Pradhan told the Lok Sabha on Monday. The minister informed the House that the Cabinet Committee on Economic Affairs (CCEA) last week gave an in-principle approval for strategic sale of the government’s share of 51.1% of the total paid-up equity in the oil marketing company to the national oil explorer which will also get management control. Though it is still unclear if there will be valuation done on HPCL before the stake sale, the government is expected to get Rs 30,000 crore from the deal as per the current market price which will help in achieving the disinvestment target of Rs 72,500 crore for the financial year 2017-18. Despite becoming a subsidiary, HPCL will remain a listed entity and the deal is expected to closed within the current fiscal. “The proposed acquisition in the oil sector will create a vertically integrated public sector ‘oil major’ company having presence across the value chain. This will give ONGC an enhanced capacity to bear higher risks, take higher investment decisions and to neutralise the impact of global crude oil price volatility,” said the oil minister. The idea to create oil behemoths was announced by finance minister Arun Jaitley in his Budget speech earlier this year.
The minster added that the deal will bring in synergies for the combined entity in terms of optimising logistics cost and refining activity, research and development activities, and economies of scale in purchasing crude oil. The CCEA has also approved to put in place an alternative mechanism which will be headed by the finance minister to oversee the transaction. The mechanism will help in taking quick decisions relating to price, time, terms and conditions, and other related issues regarding the deal. Pradhan later told reporters that Mangalore Refinery and Petrochemicals (MRPL) will be merged with HPCL but did not specify a deadline. He said this will make HPCL the third-largest refiner in the country after Indian Oil and Reliance Industries. While ONGC holds around 71.62% in MRPL, HPCL owns 16.95%. HPCL chairman and managing director MK Surana had earlier told FE that the MRPL-HPCL merger will be done after the deal with ONGC is completed.
HPCL plans to set up a 9 million tonne unit in Rajasthan and expand its refinery in Vishakhapatnam, Andhra Pradesh. This will take the company to 50 million tonne-plus per annum category in terms of refining. For ONGC, the deal will bring to it assurance of market as well as greater capability to bid for not just oil and gas fields but also refinery and downstream projects abroad, he said. “Previously, the issue was about supply security but world over market security is being sought,” he said, adding HPCL controls one-fourth of the fuel retailing market in India. The department of investment and public asset management has invited applications to engage two advisors for providing advisory services and managing the disinvestment process of HPCL. It has also invited proposals to appoint a legal advisor for the stake sale. (With inputs from PTI)