Speed Post News Network

New Delhi : The Government of India (GOI) on January 20, 2018, entered into an agreement with ONGC for the strategic sale of its 51.11% equity share-holding in Hindustan Petroleum Corporation Ltd (HPCL) at a consideration of Rs 36,915 crore.

During the review in February 2016, PM Narendra Modi had underlined the need of efficient management of Government investments in Central Public Sector Enterprises (CPSEs). The Government accordingly expanded the approach from disinvestment to investment and public asset management. As part of investment management strategy, Government decided to explore possibilities of consolidation, mergers and acquisitions within CPSE space. An announcement in this regard was made by the Finance Minister Arun Jaitley in his Budget Speech of 2017-18.

In line with the Budget announcement, the ONGC proposed to acquire the Government of India’s existing 51.11% equity shareholding in HPCL. The Union Cabinet, at its meeting held on July 19, 2017, gave ‘in-principle’ approval to the said proposal and decided to set up an Alternative mechanism under the Finance Minister to decide on the price, timing and the terms and conditions of the strategic sale, according to a PIB release.

The Alternative mechanism under the Chairmanship of the Finance Minister, at its meeting on January 20, 2018, approved the price bid of ONGC and the terms and conditions of the sale.

Through this acquisition, ONGC will become India’s first vertically integrated ‘oil major’ company having presence across the entire value chain. The integrated entity will have advantage of having enhanced capacity to bear higher risks, take higher investment decisions and neutralizing the impact of volatility of global crude oil prices.  In this process, ONGC has acquired significant mid-stream and downstream capacity and will attain economies of scale at various levels of operations, according to the PIB release.

Through this economic consolidation, HPCL will join as a member of an integrated oil and gas major group. This will help it in further leveraging synergy at various levels of vertical value chains and look for economic consolidation within and outside the Group. However, HPCL will continue to be a Central Public Sector Enterprise (CPSE).

Leave a Reply

Your email address will not be published. Required fields are marked *