Energy & synergy

The Prime Minister's exhortation to India's oil companies to "think big, think creatively and think boldly" may be an indication of his personal commitment to managerial autonomy in the public sector, but the remark raises more questions than it answers.

Can any CEO actually afford to think and act boldly when political opinion on the role of the public sector, especially in a supposedly "sensitive" sector like oil, keeps changing so much? A year back, the NDA government was asking oil companies to prepare for disinvestment and develop marketing skills for operating in a competitive environment.

Today, they are being asked to think about energy security, achieve global size through domestic M&As, deliver huge dividends to the exchequer, and also bear the burden of subsidies on kerosene and cooking gas.

Public sector undertakings (PSUs) can think big and bold only in an enabling political environment where ministers see policy-making as their core job and not the running of corporations.

While enlightened ministers, such as the current petroleum ministry incumbent, Mani Shankar Aiyar, can be trusted to avoid meddling in the day-to-day operations of PSUs, true autonomy cannot be left dependent on whether the minister concerned has set higher standards for himself or not.

The issue of managerial autonomy goes beyond the question of a minister's personal integrity""or lack of it. It is the job of the CEO and his senior management to decide what is right for their company, not that of the minister, howsoever intelligent or above board he may be.

If the management of ONGC thinks that the company's best interests lie in downstream expansion and not bidding for some gasfield in Timbuktu, it is the ONGC board that is in the best position to judge this, not the minister.

What the Prime Minister's statement at the Petrotech 2005 conference misses is simply this: when it comes to policy, it is the government that needs to think big, think creatively, and think boldly, without being held back by old hang-ups about private and public sector.

It is the government that needs to create the enabling environment in which oil companies will act in ways that serve the national interest""whether it is to achieve energy security or keep the prices of the common man's cooking fuels down.

Mr Aiyar's statement that the Prime Minister's office had cleared a proposal to set up an advisory committee on "synergy in energy" once again misses the point: governments can only enable; it is companies that must compete.

If the purpose of the committee is to suggest a policy environment in which oil companies can merge and grow big, that's fine.

But it is not the job of the government to suggest which companies must do this kind of M&A or that. In fact, it would make more sense for the chairmen of Indian Oil and ONGC to set up committees on how to grow their companies through M&A, and what kind of synergies they should be seeking with potential targets.

As the people running two of India's largest oil companies, they ought to know best what is good for them.

The duties of a minister and a public sector CEO are different. One is supposed to make policy, and the other has to see how best he can make his company prosper in a given environment.

It would be best if the Manmohan Singh government, which is committed to improve governance, starts by accepting this fundamental point before acting on any grandiose M&A plans in any sector.