The parliamentary standing committee on petroleum and chemicals has recommended the merger of Hindustan Petroleum Corporation Ltd and Bharat Petroleum Corporation Ltd, and their ultimate merger with the Oil and Natural Gas Corporation.

In its 42nd report presented to the Lok Sabha today, the committee, headed by Mulayam Singh Yadav, said, "No country with a substantive indigenous oil and gas industry operates on the model of sectoral companies."

The committee said in India, a couple of years ago, stand-alone refineries were merged with main oil marketing companies.

HPCL and BPCL together controlled around 45 per cent of the market, but they were not vertically integrated companies, it added.

The committee noted that in the global context of oil and gas business, the Indian situation was becoming unsustainable after the dismantling of the administered pricing mechanism.

It felt that there were various inherent advantages in vertical integration of oil and gas companies. It suggested that a committee of experts be constituted to suggest vertical integration of these companies.

The standing committee reiterated its earlier recommendation asking the government to seek approval of Parliament before disinvesting HPCL and BPCL.

It also said the national security scenario demanded that HPCL and BPCL be retained as public sector undertakings.

It criticised the government for restraining public sector undertakings  from bidding for other similar organisations saying, "This negates the concept of competition and runs counter to the essence of right to equality." The committee has recommended immediate withdrawal of this order.

The committee recommended that the Indian Oil Corporation should be given more functional autonomy to enable it to compete with international companies.

Merger issues

• HPCL and BPCL together control around 45 per cent of the market, but they are not vertically integrated companies.
• In the global context of oil and gas business, the Indian situation is becoming unsustainable after the dismantling of the administered pricing mechanism.
• A committee of experts should be constituted to suggest vertical integration of HPCL, BPCL.
• A-I, IA and the AAI will be entitled to 10 per cent of the total revenue generated by the companies.