Consolidation in public sector oil firms may be back on table in FY22

By Subhash Narayan New Delhi, Feb 6 : After a gap of more than two years, the government may again revive the plan for further consolidation in the public sector oil companies by allowing mergers between producing, marketing, gas transportation and consultancy companies, leaving just few large integrated entities in operation.
The move follows the design of the new privatisation policy unveiled in this year’s Budget. As per the policy, only a bare minimum presence will be maintained in the strategic sectors, including petroleum, while other entities would be privatised.
With the government already proceeding with the privatisation of Bharat Petroleum Corporation Ltd (BPCL), it is felt that the bare minimum principle would allow for consolidation in the sector through mergers and amalgamations.
So, after the 2018 merger of PSU oil refiner and retailer Hindustan Petroleum Corporation Limited (HPCL) with upstream major Oil and Natural Gas Corporation (ONGC), sources said the government may now look at creating another public sector integrated ‘oil behemoth’ by considering the merger of upstream oil producer Oil India Ltd (OIL) with Indian Oil Corporation (IOC).
Moreover, after the proposed split of gas transportation company GAIL into two, one of the entities in gas marketing may also be considered for merger with IOC.
“Nothing is off the table. And not all or most companies in the strategic sector would be privatised after reserving the bare minimum presence. Consolidation will be pursued so that stronger integrated entities are built even as number of PSUs will fall,” said a top official from the Department of Investment and Public Asset Management (DIPAM), not willing to be named.