Ioc-Petronas Venture To Be Cleared Soon

Indian Oil Corporation's (IOC) proposal for a joint venture with Petronas of Malaysia has come before the Department of Company Affairs (DCA) for final approval. The proposal has already received clearance from the Cabinet Committee on Economic Affairs (CCEA). The DCA had earlier indicated an `in principle' approval for the proposed Rs 45 crore investment by IOC in the joint venture for setting up a 600 million tonnes per annum (mtpa) liquefied petroleum gas (LPG) terminal at Haldia. But then it went on to ask IOC for an approval from the CCEA and the petroleum ministry before it could be given a go-ahead under section 372 of Companies Act, 1956.

 

According to company sources, IOC has now submitted both these clearances to the DCA. Although many inter-corporate investment proposals under section 372 have been stalled for the last six months due to delay in DCA clearances, IOC's proposal is likely to passed soon.

"Being a public sector company, there is unlikely to be any unwarranted delay once the required particulars have been furnished, and the clearance from the administrative ministry obtained," sources said.

Under section 372 of the Companies Act, 1956, a company, together with its subsidiaries, has to obtain DCA clearance for any equity investment which results in the company picking up a total of 30 per cent stake or more in another company, or if such an investment is more than 30 per cent of its own subscribed capital and free reserves. The Cabinet had recently approved IOC's joint venture proposal. IOC and Petronas will have an equity share of 50 per cent each in the joint venture company. IOC will invest Rs 45 crore in the project which is expected to cost Rs 200 crore.

The CCEA and petroleum ministry clearances were considered crucial because the finance ministry had earlier held back its approval to the project on the ground that a similar proposal had been submitted by IBP-Caltex combine. It was thought that considering the demand-supply position and the constraints at Haldia port, there was room only for one LPG import terminal.

IOC had represented to the petroleum ministry that in view of the recent decision taken by both IBP and Caltex to separately market their lubricants, the two companies might not like to implement the LPG project together.

The Oil Coordination Committee (OCC) had supported the IOC proposal. The OCC had also said that IBP and Caltex should be "advised to review their decision regarding creation of import facilities at Haldia since the progress made by them so far is negligible as compared to the IOC project". The proposal to set up the import facilities at Haldia was submitted by IOC-Petronas in 1991.