Government Proposes Plan To Merge PSUs To Create World’s Ninth Largest Oil Giant

India may soon have its own oil behemoth, comparable to those owned by the gulf-states and major oil producers in the world, as the government has laid down a plan to merge PSUs to create the world’s ninth largest global oil major. The plan to merge five oil biggies first emerged, though informally, during NDA’s first term.

Dharmendra Pradhan, Minister of State for Petroleum and Natural Gas, has said that the industry needs integration and the budget has laid down the policy for the same. “Globally, M&A (mergers and acquisitions) is the trend in the oil industry. With the policy in place, companies will chalk out mergers and acquisitions in accordance to their strength and weaknesses. We will see M&A activities in the public sector oil industry in coming days,” Pradhan was quoted by Times of India as saying.

While the policy has been laid, the merger route has not been finalised. The PSUs could either be merged by creating a holding company or by individual M&A. India has 13 oil PSUs currently, eight out of which have a combined market cap of $80 billion. If merged, they entity that emerges will be comparable to ExxonMobil Corp. or Royal Dutch Shell Plc.

According to Gas Authority of India chairman B C Tripathi,“The proposal will provide scale and muscle, which can be leveraged in the global market”. The government seems interested in forming an integrated company, Oil and Natural Gas Corporation chairman Dinesh K Sarraf said, adding that the creation of a new and larger entity will “Indian industry’s negotiating power globally”.