Deal or no deal: Letter to BS on ONGC's HPCL acquisition

This is with reference to “ONGC-HPCL deal has logic, but can’t address fiscal woes” (January 26). I think the ONGC-HPCL mega deal is merely a case of transferring money from from one pocket of the government to another. It is difficult to call it disinvestment in the strict sense of the term, though technically, it may be so. Both the entities are state controlled; so how does this deal qualify as disinvestment, which should really mean sale to the private sector or to retail investors? This deal fails on this criterion. The deal only makes ONGC an owner of the stake that the government held earlier in HPCL. 

The fact that the government is a major shareholder in ONGC means that really nothing has changed. Admittedly, there is merit in the deal due to obvious benefits of synergy; an excellent case of vertical integration which should lead to savings in operational costs and will hopefully make ONGC more competitive. But, again, who are ONGCs competitors? Primarily Indian Oil and BPCL. No private sector company is really into retailing of fuels in a big way. So, unless the long-term plan is to weaken these two giants and for ONGC to buy them over also at some stage, this deal does not make much sense. 

Krishan Kalra  Gurugram

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