Cabinet approves merger of HPCL with ONGC

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SME Times News Bureau | 20 Jul, 2017
The Union Cabinet on Wednesday gave its in-principle approval to the merger of oil marketer Hindustan Petroleum Corp Ltd (HPCL) with state-run explorer Oil and Natural Gas Corp. (ONGC), official sources said in New Delhi.

The cabinet approved the sale of the government's stake in HPCL to ONGC. Under the arrangement, the exploration giant will not have to make an open offer after buying the 51.11 percent government stake in HPCL, the sources added.

The HPCL board will continue to be in place, while it will be listed as a subsidiary of ONGC after the merger.

Earlier on Wednesday, Petroleum Minister Dharmendra Pradhan had informed Parliament that ONGC had sent a proposal to acquire HPCL and that the "process for in-principle approval for this proposal has been initiated".

Presenting the Union Budget 2017-18 in February, Finance Minister Arun Jaitley had proposed the setting up of an integrated oil company by merger of upstream and downstream entities.

"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 said.

"Through consolidation, mergers and acquisitions, the central public sector enterprises can be integrated across the value chain of an industry. It will give them capacity to bear higher risks, avail economies of scale, take higher investment decisions and create more value for stakeholders. Possibilities of such restructuring are visible in the oil and gas sector," he said.

Pradhan earlier clarified that the government's intent to merge state-run oil companies into a single entity will actually mean creation of multiple entities.

"It will not be one company. It will not be wise to put all eggs in one basket. There will be multiple companies... but all these will be integrated," Pradhan told reporters here following the Budget announcement.

He elaborated that each new company would deal with aspects of the entire value chain such as exploration and production, refining and marketing.