The case for merger of oil PSUs

22 January 2005

Integration of oil companies will result in global majors with clout, Uday Chatterjee reports. In the early '70s, a decision was taken by the government of India to set up an oil refining plant with crude imported from Iran. The government decided to set up the refinery at Mathura in UP. That would have meant that the crude would have to be first shipped to Bombay and then transported all the way to Mathura.

The decision was fundamentally flawed as the refinery should have been set up near the west coast to save on transportation costs. But then, the then minister for petroleum was Kamalapati Tripati, who hailed from UP.

This is how some of our refineries were conceived.

IOC, HPCL and BPCL all belong to the government of India and yet they have set up state of the art retail outlets next to each other's, competing for the same market.

IOC and GAIL are having public spats for a share in Haldia Petrochemicals and for developing a LNG block with Iran's Petropas.

Nowhere in the world are there so many public sector companies in the same business - three, IOC, BPCL and HPCL in fuel retailing; two, ONGC and OIL in oil exploration and production; and two, IOC and GAIL in petrochemicals. Besides, IOC, BPCL and HPCL want a slice of overseas equity oil, where they will compete with ONGC Videsh.