August 18, 2018
Business

PSU oil M&As exempt from CCI nod

‘Move in public interest, is part of key reforms by government to fuel growth’

Combinations including mergers, acquisitions and amalgamations involving Central Public Sector Enterprises (CPSEs) operating in the oil and gas sector, have been exempted from seeking the nod of the Competition Commission of India (CCI) for five years from now.

The move, being carried out in “public interest”, comes even as the government had said in a statement on November 14 that it was undertaking a number of key economic reforms to fuel growth and that these included “consolidation of government-run oil companies.”

Clearing the decks

According to a Ministry of Corporate Affairs (MCA) notification dated November 22, “the Central Government in the public interest hereby exempts all cases of combinations … involving the CPSEs operating in the Oil and Gas Sectors under the Petroleum Act… and the rules made thereunder or under the Oilfields (Regulation and Development) Act, 1948 … and the rules made thereunder, along with their wholly or partly owned subsidiaries operating in the Oil and Gas Sectors, from the application of the provisions of sections 5 and 6 of the (Competition) Act (pertaining to combination and their regulation), for a period of five years from the date of publication of this notification in the Official Gazette.”

As per the Competition Act provisions, combinations over and above a certain threshold need the the competition watchdog CCI’s nod. Similarly, in August the MCA had notified “the Central Government in the public interest exempts, all cases of reconstitution, transfer of the whole or any part thereof and amalgamation of nationalised banks… from the application of provisions of Sections 5 and 6 of the Competition Act, 2002, for a period of 10 years from the date of publication of this notification.”

In July, the then Minister of State (Independent Charge) of the Petroleum and Natural Gas Ministry, Dharmendra Pradhan, had in a statement to the Lok Sabha said that the “Cabinet Committee on Economic Affairs in its meeting held on July 19 has given ‘in principle’ approval for strategic sale of the Government of India’s existing 51.11% of total paid up equity shareholding in Hindustan Petroleum Corporation Limited ( HPCL) to Oil and Natural Gas Corporation Limited (ONGC) along with transfer of management control.”

He added that “The proposed acquisition in the oil sector will create a vertically integrated public sector ‘Oil Major’ company having presence across the entire value chain.”

The Minister further said, “This will give ONGC an enhanced capacity to bear higher risks, take higher investment decisions and to neutralize the impact of global crude oil price volatility. The acquisition of HPCL by ONGC will result in significant synergies, in terms of optimization of logistics costs, R&D activities, economies of scale of purchase of crude oil and optimization in refinery operations.”

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