India Exempts State Oil Firms Mergers From Competition Approval

Clearing the way for its plans for mega-mergers among state-held oil and gas companies, India is now exempting such mergers and acquisitions deals from seeking mandatory approvals from the Competition Commission of India (CCI).

All kinds of M&A involving central public sector enterprises (CPSEs) in the oil and gas sectors are now exempt from the required CCI approval for five years, India’s Ministry of Corporate Affairs has said. The exemption also extends to those companies’ wholly-owned or partially-held subsidiaries operating in the oil and gas sectors.

In early February this year, India’s Minister for Finance and Corporate Affairs, Shri Arun Jaitley, said in the presentation of the 2017/18 budget in Parliament that the country was planning to create an integrated public-sector oil major to match the performance of huge international private sector oil and gas companies. 

In the summer, India started consolidating oil sector company stakes, and approved a plan to sell its entire 51.1-percent stake in the third-largest local refiner Hindustan Petroleum Corp (HPCL) to the country’s biggest explorer, state-held Oil and Natural Gas Corporation (ONGC). The government aims to finalize the deal by the end of the current Indian financial year through March 2018, Oil Minister Dharmendra Pradhan said on July 24. 

Just a week before that, reports had emerged that India’s top refiner Indian Oil Corporation (IOC) may buy out the government’s 66-percent stake in exploration company Oil India, in a second deal involving oil firms that is part of India’s plan to create a giant integrated oil company.

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Minister Pradhan has said that after the ONGC-HPCL deal, the government will be looking at its capacity and energy requirements to see what other oil firms it could integrate.  

India’s plan to merge some state-held oil enterprises could reduce inefficiencies in the sector, Fitch Ratings said in February, shortly after the initial project was announced. An oil major would also be in a better position to compete for resources globally and withstand oil price volatility. On the downside, Fitch sees the plan as likely reducing competition on the domestic market, and facing challenges in the actual executions of the mergers.

By Tsvetana Paraskova for Oilprice.com

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