Ex-ONGC officers suggest oil PSU merger

Vol 23, PW 19 (30 Jul 20) News in Brief

Ex-ONGC officers are watching government moves to sell Bharat Petroleum with concern, and don't want the same to happen to ONGC.

As the government prepares to receive bids for its 52.98% stake in BPCL on September 30, they have revived a proposal for the merger of ONGC and IOC as an alternative. In a two-page letter sent on July 20, the All India ONGC Ex-Employees Welfare Association (OSEWA) says it is necessary to merge "two large corporations such as ONGC and IOC to operate efficiently across the value chain of exploration and production to refining and marketing."

Association president LK Mirchandani writes: "Adopting an end-to-end operation is the norm in some of the largest oil companies in the world such as ExxonMobil, BP, Shell, Saudi Aramco and CNPC." He adds this helps companies manage risks and fluctuations in oil prices.

Mirchandani tells us integrated oil companies can better compete in the global market and achieve economies of scale. "Unfortunately, in India," he adds, "the government favours separate oil companies focused on exploration and production, refining and marketing or gas sales."

An ONGC and IOC merger would create a new organisation with a higher risk appetite, he says.