By Shirish Nadkarni
OGJ correspondent
MUMBAI, Mar. 1 -- India has appointed a state panel to examine the restructuring of public energy enterprises after government-owned upstream company Oil & Natural Gas Corp. bid $5.9 billion to acquire state-run refiners Hindustan Petroleum Corp. Ltd. and Bharat Petroleum Corp. Ltd.
In a presentation to a government-appointed committee, ONGC Chairman Subir Raha recommended the formation of two large public conglomerates, one led by ONGC and the other led by Indian Oil Corp., with the latter to include upstream major Oil India Ltd.
He said the conglomerates should also be allowed to enter the power, petrochemicals, shipping, and related businesses.
"The two conglomerates should be allowed to 'chase the molecule to the end' to compete with the burgeoning private sector," Raha said.
Diversification into downstream activities is a point of contention between the oil companies and the Ministry of Petroleum and Natural Gas, which insists that the companies stick to their areas of core competence.
Raha responded that the proposed combination would reduce taxes and transaction costs, optimize the use of resources, and help Indian companies compete internationally.
Initial estimates have indicated that integration along the lines suggested could result in a 5-10% reduction in costs.
The proposed acquisitions would give the ONGC group refining capacity of 42 million tonnes/year.
Hindustan Petroleum is not anxious to merge with ONGC and would rather join Bharat Petroleum.
The evaluating panel is expected to report to the government in mid-March.
