GUWAHATI, June 1 ? The Union Ministry of Petroleum and Natural Gas has sought opinions of Oil India Limited (OIL) and Bharat Petroleum Corporation Limited (BPCL) which has controlling stake in Numaligarh Refinery Limited (NRL), on the Indian Oil Corporation (IOC) proposal for formation of an integrated oil company by merging all the refineries in Assam with the crude producing company OIL. Sources in the oil industry informed that a crucial meeting on the proposal for merger of all four Assam refineries with OIL would be held at New Delhi this week at the initiative of the Ministry. It is likely that the Ministry of Petroleum and Natural Gas will consult the Government of Assam on the restructuring exercise of the refineries.
IOC moots merger of the Assam refineries to pave way for consolidation of all its assets in the region under one umbrella, thereby bring about synergies of operation. The IOC is under impression that merging of activities of all the four small refineries in Assam will not be a very difficult task. Rather it makes sense to integrate these into a bigger organisation so that together they become capable of facing the competition in the post Administrative Price Mechanism days. IOC proposes the integrated refinery will have its registered office in Assam and IOC will hold 51 per cent equity share in the new company. While various options involving different oil companies of the North-east are considered in the proposal for merger, the IOC makes clear its intention of holding 51 per cent equity in the new venture. Thus, though the integrated refinery will be a separate company it will remain a subsidiary of IOC which will allow the latter to preserve its monopolistic market in the region, according to a source in the oil industry.
However, it remains to be seen whether BPCL will agree to fully offload its equity in the NRL in the event of a merger of refineries. It is because unike the other three refineries, the NRL which is a subsidiary of BPCL, has made sizeable profits in its first two years of operation. Moreover, NRL which had recently been allotted the rights for marketing transportation fuels, remains the best buy for any such merger or takeover. In such a backdrop, BPCL which itself is due for disinvestment in the near future, may not like to fully offload its equity in NRL.
Sources in the Ministry informed that the decision on this merger will probably be taken before BPCL starts its disinvestment. BPCL proposes public issue of Rs 1500 crore which is bound to cause a substantial change in the equity structure of the company. Meanwhile, IOC is regrouping its assets after having decided to pull out its stocks of 10 per cent from ONGC and GAIL and will probably go for an aggressive bid for BPCL shares, provided it is allowed to do so.