Oil PSUs merger will lead to job losses: Advisory committee

Our Economy Bureau
12 July 2005

New Delhi: The advisory committee on restructuring of oil PSUs has ruled out merger of the oil entities. The committee was constituted six months back to consider consolidation in the oil sector, to consider the options of a merged entity or entities, with enhanced financial powers. In the last six months, the ''Synergy in Energy committee'' members deliberated in detail on various merger options. The committee has noted in its report that mergers and consolidations world-wide occurred during times of low oil prices and between companies that were already vertically integrated.

Hence, they became a means for eliminating excess workforce and duplicate facilities. In the Indian context, despite some efforts at vertical integration, the oil PSUs retain their distinct areas of competence. The committee has also ruled out a merger on the grounds that it is likely to lead to loss of jobs.

The committee has laid greater focus on domestic exploration through new technologies as also on pursuing overseas oil and gas acquisitions aggressively.

It has accordingly set stiffer targets for meeting at least 15 per cent of crude oil imports of 80-million tonne per annum through the oil equity route. It has, therefore, recommended creation of multiple entities. Towards this end, it has suggested setting up Oil India Videsh Limited (OIVL) as an independent subsidiary of Oil India Limited (OIL).

ONGC Videsh Limited (OVL) will pursue larger acquisitions of over 2-million tonnes of oil and gas equivalent. In the last fiscal, OVL has already achieved 5-million tonnes of oil and gas equivalent and by the end of 2007, it expects to achieve a target of around 9.5-million tonnes per annum of equity oil and gas abroad.

Achieving the targets set up the committee by OVL is not a difficult task. More than 3mtpa of equity oil is already coming from Sudan and around one-million tonnes equivalent of gas from Vietnam.