Can ONGC Have Two Boards & Two Chairman? SEBI Guidelines to Decide
Subir Raha’s Soul must be happy man today
It was the iconic Oil & Gas leader, Mr. Subir Raha who is credited with one of the most sensational industry propositions for Oil & Gas Sector in India. It went on to become an epic of sorts. In his opinion, to be competitive and raise to the top of Oil & Gas Business Indian PSUs should have presence in all the verticals. An integrated Up Stream, ’Middle’ Stream and Down Stream company made sound business sense. Indeed, most of the leading Oil & Gas Companies of the world viz. Chevron, Shell, BP etc. have presence in all the streams. Alas, the then Minister heading the Oil & Gas industry had a running feud with Mr.Raha and the proposal never saw the light of the day. Rumours got floated that Mr. Raha, an out-and-out Corporate Honcho, had developed designs to take over as Secretary, MOP&NG. Obviously, all bureaucratic guns got trained at him. And he did not even got an extension as Chairman. That’s history.
Cut to the recent ONGC AGM held on 23.08.2024 at Oberoi at Mathura Road, New Delhi. The current ONGC Chairman, in the AGM, while waxing eloquent on business achievements of ONGC, went on to strongly emphasize that HPCL was its subsidiary. By doing this, he unwittingly, threw a stone in the Oil & Gas Pond, creating ripples. It’s not really known how the mandarins in the Government have taken to the pointed reference. We need to go back in time and do a bit of analysis to understand the full context of newly found love of ONGC for HPCL. ONGC acquired HPCL in January 2018 at Rs 36,916 Crore, when money was sorely needed by the government and nothing much seemed to be forthcoming from the market. The Babus maybe were not yet bold enough to press for an outright sale of an Oil PSU.
Of course, when they did get the courage, they fell flat on their face. In 2021 – 22 there was an attempt to sell BPCL. At the then trading price of BPCL, on stock market, the government’s 53 per cent stake was worth over Rs 38,000 crore. And the bidder would have to also shell out extra, Rs 18,700 crore towards an open offer to minority shareholders. All attempts were made including side stepping SEBI to ensure the sale came through. However, as luck would have it, the Sale fell through. In May, 2022, a red faced government, had to withdraw the offer to sell its entire 53 per cent stake in BPCL, stating sheepishly that majority of bidders had expressed their inability to participate. So much so for due diligence. The hasty shot taken at sale of BPCL and obviously not so well thought out financial equations, made everyone wonder what prior financial & business studies were made, if at all? Was it a purely political move under the guise of a business deal? The mockery of the Sale attempt of BPCL still rankles.
The world of Oil & Gas had a mighty laugh at the expense of the government. Surprisingly, the Auditor General of India, had nothing to say on the money wasted in the process, loss of face of Govt. of India or even fixing responsibility on those responsible. The BPCL Sale attempt will go down in the history of India as one of worst economic exercises. Heeding to the advice of an ignorant and power drunk bureaucratic groups, proved costly for Government of India. India had to face one of its worst embarrassments. By the way, Air India was sold for about Rs 18,000 Crore in Jan 2020. But we distract. This article is not about the blundering ways of PSE sales. It’s about ONGC’s one shot chance at glory.
ONGC, today is one of the rare companies on the Indian Business firma which has the unique opportunity to stride over the entire pantheon of Oil & Gas Sectors. It has presence in upstream, ‘midstream’ & downstream and is the only integrated company of its kind in India. This position of ONGC outclasses all other Oil & Gas Companies like IOCL, BPCL, GAIL etc. It’s one Indian PSE which has an opportunity which no other Indian Oil & Gas Company ever had. All this has been handed over to ONGC on a platter. With government backing, it can surpass any company operating in this sector. ONGC is already the top most exploration company in India. It has an overseas wing in ONGC Videsh.
It can easily get oil equity to neutralize any rising cost impacts. HPCL has, inter alia, one of the biggest networks of Refineries, Storages, Depots and Retail Outlets. Many of its Refineries are coastal based and if domestic consumption were to go down due to alternatives, renewals etc. it can still make money through exports. The much talked about Oil Security of India can be made possible if ONGC plays its cards well. ONGC – HPCL has the capability of emerging as the numero uno company in India.However, what has to be seen is despite its advantaged position has ONGC and its subsidiaries done that well? The jury is still out on this. The target achievement in terms of new finds by ONGC is nothing to write home about. ONGC Videsh investments in Africa, Russia and South America have run into difficulties.
HPCLs Refining Projects have been lagging behind. The Retail presence of HPCL, in the market, belie Sales. So there is much to be done in both ONGC as well as HPCL. However, it may well take a Subir Raha like figure to cut through the clutter and take the opportunity for pitching ONGC – HPCL combine into a world class integrated Oil & Gas major. However, many Oil & Gas regulars regret that the quest of today’s leaders is not Profits & Business Excellence but rather entitled demands for territorial and bragging rights.
Some administrative issues also need to be sorted out. Many experts feel that HPCL, being a subsidiary of ONGC need not have a separate Chairman. Having a separate Chairman means increasing Red Tapism & Bureaucracy.The world over, delayering and flattening of organizations is the norm. Having two Chairmen is going to be wasteful. The cost implications and less rapid decision making do not warrant two Chairmen. A MD or Director of HPCL could handle matters smoothly in HPCL. If someone was to assume that the HPCL Chairman would ultimately report to ONGC Chairman, it does not seem probable. After PESB failed to find a Chairman for HPCL a Search Committee has been already constituted for selecting HPCL Chairman.
This Selection Committee is itself oddly placed where a gentleman currently engaged in West Coast Refinery is also a member. Of course, SEBI guidelines need to be looked at carefully, as to whether, one company can have two Boards and two Chairmen? The problem in India often is, when an opportunity opens up for building a great integrated Oil & Gas Major which can compete with the best in domestic and international milieu, the path gets ruined by forces of its own making.
Indian economy is largely controlled by Oil & Gas. Its rise to the third largest economy of the world would be heavily dependent on Oil Economy. Alternatives, Renewables etc. will take its own times and the ecological impact of the ‘remains’ of these new sources of energy will also have to be studied carefully. The much tom-tomed Hydrogen as source of energy has to be very carefully studied in terms of Safety lest we have atomic energy like disasters. No one wants Hydrogen induced Fukushimas or Chernoblys. Therefore, most energy experts who are prudent and not mere enthusiasts are still willing to put their money on Oil & Gas, at least in the developing world. So ONGC – HPCL combined has a great potential. Subir Raha, may well see his dreams come true from his heavenly abode.
