The next step after the completion of the ONGC-Hindustan Petroleum Corporation Ltd deal is to see whether the latter can evolve into a petrochemical major. This can be achieved by vertically integrating the petrochemical subsidiaries of ONGC with HPCL, said Dharmendra Pradhan, Minister for Petroleum & Natural Gas.
Speaking to reporters a day after the formal approval of the ONGC-HPCL deal was announced, Pradhan reiterated that HPCL will continue to operate as an independent public sector enterprise after the share sale.
“But after becoming an ONGC group company, I can see that there is potential of creating an integrated refinery group,” Pradhan said, hinting of a possible integration of Mangalore Refinery And Petrochemicals Ltd (MRPL) with HPCL.
He, however, was quick to point out that any decision on this would rest with the boards of ONGC and MRPL.
“Within the ONGC group, there are ONGC Mangalore Petrochemicals Ltd (OMPL), ONGC Petro Additions Ltd (OPAL), and HPCL has a stake in Bhatinda refinery (in joint venture partnership with the LN Mittal group),” Pradhan noted. “All these could belong to HPCL if they wish. This will boost HPCL’s plans to expand in the petrochemical sector, such as the ones they have for the Barmer refinery, the West Coast refinery and for the one in Kakinada. If we combine all these, an integrated refinery vertical can be developed,” he added.
Asked to elaborate how the government projects the ONGC-HPCL deal as a “strategic sale” and whether it can be considered as disinvestment, Pradhan said, “This should be looked at as an innovative vertical economic integration. We should not get caught up in the jargon of whether it is a strategic sale or a disinvestment or not.”
Pradhan said this should be seen as a deal where the Government has effectively transferred its stake to a government company for an appreciable price. “Government revenues have increased. Just the financial consideration was not an issue,” he said, adding that “there was an appetite for the oil major in India, looking at the price volatility. When the crude price of oil rises, the margins for marketing company come under pressure. Looking at India’s consumption pattern, government experts believed that this was needed.”
Changing economic modelsPradhan went on to add that “economic models and governance change with time. When HPCL was acquired by the government, it was done so through parliamentary Acts and rules. This came with some responsibilities and established practices. When we decided to offload them further, we found that this was the best model.”
HPCL’s shares closed down by 3.55 per cent at ₹401.75 a scrip while ONGC’s shares were up 3.28 per cent at ₹199.95 a share on the bourses. Shares of MRPL were up 3.22 per cent at ₹130 a scrip on the exchanges.