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Veterans Plead For Oil And Gas PSUs’ Autonomy For Efficient Decision Making
Oil and gas industry veterans gathered at the World Energy Policy Summit pleaded with the government to grant full autonomy to the public sector undertakings (PSUs) in this sector for efficient decision making and professional business approach.
Despite being full-fledged government-owned companies registered under the Ministry of Corporate Affairs (MCA), the board of oil and gas marketing companies contain at least one government nominee, who normally comes from the parent ministry – Ministry of Petroleum and Natural Gas – of a director-cadre bureaucrat. In absence of the government-nominee board member, decision makings get deferred, which means the government takes all day-to-day decisions including investments and divestments.
These industry veterans normally get elevated to the chairman and managing director’s (CMD’s) post after dedicating several decades of service to the company. Apparently, they know every bit of industry and understand the business more efficiently than the government nominee. Sometimes, the PSU’s CMD possesses more experience than the cumulative experience of almost half the members of the board. Still, the government-nominee places advice and argues issues pertaining to the company’s business.
“You will be surprised to note that sometimes the government-nominee does not know the difference between petrol and diesel, but advise the board in decision-making. Investment decisions are taken based on merits. On multiple occasions, the board needs to convince the government-nominee about the rationale for the new investment. The government-nominee gets in principal nod from the concerned minister which is a time-consuming job. We, therefore, had written to the government on multiple occasions to make the company independent for decision making as the entire company is run by a professional board,” said Subhash Kumar, former chairman of Oil and Natural Gas Corporation (ONGC).
In addition to ONGC, Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL), Hindustan Petroleum Corporation Ltd (HPCL), and Gail India Ltd are the PSUs engaged currently in the oil and gas exploration, import, trading, and distribution businesses.
While assuming the office of the chief of their respective organizations, these veterans have recommended the government on several occasions to form one parent ministry to avoid reporting to the multiple ministries. Sometimes, details are sought from the parent ministry – the Ministry of Petroleum and Natural Gas.
“On several occasions, we had recommended to the government to form one ministry for the entire oil and gas sector under the banner of – Ministry of Energy. But, the recommendation has not been accepted yet. Currently, these PSUs need to report to several ministries. This kills a lot of time which can be utilized otherwise for productive purposes,” said Kumar.
Despite these restrictions, Indian oil and gas PSUs have performed well and yielded a huge dividend for the exchequer. According to an estimate, the oil and gas sector has cumulatively paid Rs 11000 billion so far to the government as a dividend.
Speaking on the webinar titled ‘Navigating the tough road ahead’, Bhuwan Chandra Tripathi, former chairman and managing director of GAIL India Ltd, called for a reduction in the government’s stake in oil and gas PSUs which may be called as ‘Golden Share’ and should not be more than 30-35 percent, as seen in the case of government-owned companies in Europe.
“Let the remaining shares go to the foreign investors (FIs), foreign institutional investors (FIIs), domestic institutional investors (DIIs), and private companies. Bring in more professionals on the board and let them run the company professionally. Also, the PSUs boards do not follow listing guidelines as set out by the markets regulator – Securities and Exchange Board of India (Sebi). They must follow Sebi guidelines,” said Tripathi.
Today, oil and gas PSUs’ cumulative annual investment is estimated at Rs 3000 billion. But, the investment is not exploited yet with their full potential due, primarily, to the delay in decision-making in the parent ministry. The need of the hour is to invest aggressively in the emerging sectors like hydrocarbon, specialty chemicals etc. either in partnership with the existing companies in this field or acquisition of the existing entity.
“Several assets are built 50-60 years ago that is still serving the nation. It is, however, yet to be established whether the new investments taking place every year, are future-ready. PSUs also need to invest in the most important sector i.e. human resources which along with technology is very important for energy transition,” Tripathi added.
Another former chairman and managing director of ONGC, R S Sharma, lamented, “An autonomy is needed for oil PSUs. The control comes from the parliamentary committee and the parent ministry. Often, explanations are sought from the person who does not know the difference between petrol and diesel. Infructuous time goes on parliamentary questions. There are so many controls on oil PSUs. The concerned officials get into a big problem in case of any difference in facts and figures. All these things do not happen with an autonomous body.”
Kumar urged the government to extend financial support to the oil and gas companies, broadly equivalent to the amount distributed through various subsidies and schemes.
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