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OilMin seeks proposals from PSUs to set up integrated co

OilMin seeks proposals from PSUs to set up integrated co
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The Petroleum Ministry has asked state-owned oil giants to come up with proposals for the companies they want to acquire or be merged with so as to become integrated oil company.
Following up on Finance Minister Arun Jaitley's Budget announcement of creating an integrated oil company, the ministry has asked companies in its purview to present integration plans, Oil Minister Dharmendra Pradhan told reporters here.

"We have asked the companies to appoint consultants, assess the advantages and disadvantages. Let them come with concrete proposal to the ministry," he said.

The Department of Investment and Public Asset Management and the Petroleum Ministry together are closely monitoring the integration plans. "I think things are on the right track. We are evaluating what will be the roadmap. Nothing is in front of me, it's up to them. I'm the policy custodian, I'm not the businessman," he said.

Pradhan said it is to be seen what proposal is put up and if "it is in favour of the overall national interest".

"We brought this idea because it falls in the oil and gas scenario we are visualising. If there is integration from upstream company to downstream company, they will compliment each other in cyclic situation. The companies will have to work out the nitty-gritties. Let them come up with the proposals," he said.

The government is looking at creating an integrated oil company and the idea is to merge an oil producer with a refiner.

There are six major state-owned companies in the sector - ONGC and Oil India Ltd being the oil producers; Indian Oil Corp (IOC), HPCL and Bharat Petroleum Corp Ltd (BPCL) in the refinery business and GAIL in midstream gas transportation.

The rest, such as ONGC Videsh, Chennai Petroleum Corp (CPCL), Numaligarh Refinery Ltd and Mangalore Refinery (MRPL) are subsidiaries of one of or the other PSU.

One option is to merge refiners HPCL and BPCL with ONGC and merge IOC and OIL. This would create two large vertically integrated oil companies.

More than 12 years after a proposal to merge oil PSUs was first mooted by the then oil minister Mani Shankar Aiyar, Jaitley in his Budget for 2017-18 proposed 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".

The behemoth so created will not just compete globally, but withstand oil price volatility by using profits the refining business make in low oil prices to make up for losses in upstream and vice versa.
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