PSUs IOCL and BPCL might acquire the government’s stake in GAIL, if approved by the petroleum ministry

After the successful merger of fuel retailer Hindustan Petroleum with Oil and Natural Gas Corporation (ONGC) last year, the government has planned on merging gas-utility giant GAIL with Indian Oil Corporation (IOC) or Bharat Petroleum (BPCL).

As reported by IANS, the government is looking to split GAIL’s gas marketing and transportation business and intends to merge the marketing business with either IOC or BPCL. Click To Tweet

The process has already been initiated as the Oil minister Dharmendra Pradhan had told that the ministry to instruct GAIL to come up with a plan for bifurcating its marketing and transmission business, with the former going to ONGC or BPCL and the latter to a strategic partner, the bids of which could come from the private sector.

“Marketing and laying of pipelines or transmission are two different segments, the ministry has always been of the opinion that these two job functions being done by GAIL should be separated. Yes, we have told them to prepare a road map for this,” Pradhan said. He added that as of now no timeline on the split has been decided.

The decision is also aligned by the government’s intention, as directed by the former Finance Minister Arun Jaitley. In his Budget 2017-18 speech, Jaitley had expressed the government’s intention to strengthen central public sector enterprises through consolidation, mergers and acquisitions, starting the process with the oil and gas sector – which considering the largesse of operations and revenue would be rather profitable for the government and impactful.

The proposal stems from the new Oil and Energy economy under the Narendra Modi government as it planned to create an integrated public sector “oil major” – much like the international nexus’ – thus making India match the performance of international and domestic private sector oil and gas companies.

As it stands, the government is continuing with its plan to consolidate public sector units – the case for which was made clear by Finance Minister Nirmala Sitharaman        in her Budget speech this year.


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