ONGC nominates one director on HPCL board; wants common govt director

New Delhi: State-owned Oil and Natural Gas Corp (ONGC) has replaced a government nominee director on board of Hindustan Petroleum Corp Ltd (HPCL) with its nominee as it consolidates control over the company it had recently acquired.

ONGC, which had in January completed the acquisition of the government's 51.11 per cent stake in HPCL for Rs 36,915 crore, has appointed its Director (Finance) Subhash Kumar on the company board, sources said.

He has replaced Sushma Taishete Rath, Joint Secretary in Ministry of Petroleum and Natural Gas.

Till now HPCL had two government nominee directors - Rath and Sandeep Poundrik, Joint Secretary (Refineries) of the oil ministry.

After the appointment of Kumar, there remains only one government nominee director on HPCL.

The sources said ONGC wants the one government nominee director on HPCL board to be the same person as on its board.

ONGC Board has two government directors - Amar Nath, Joint Secretary - Exploration in the Oil Ministry, and Rajiv Bansal, Additional Secretary & Financial Adviser in the ministry.

It wants Bansal to be appointed on HPCL board in place of Poundrik to have a common link between the two boards, they said.

After acquiring government's stake, HPCL is now a subsidiary of ONGC.

Like its other major subsidiaries -- Mangalore Refinery and Petrochemicals Ltd (MRPL) and ONGC Videsh Ltd, ONGC decided to nominate just one director on the board of HPCL, sources said.

HPCL board currently has four functional directors besides the Chairman and Managing Director. It also has two government nominee directors and six independent directors.

Sources said the Articles of Association of HPCL provide for the board to be made up of a maximum of 20 directors, including independent ones.

ONGC could theoretically speaking, nominate more than one director but such nomination would have to be matched by an appointment of an equal number of independent directors.

So, while ONGC can nominate 3 directors, it decided to name only one, they added.

MRPL and OVL both have just the ONGC Chairman and Managing Director on their board. Both MRPL and OVL have Managing Director and functional directors.

Since HPCL by virtue of 51 per cent shareholding of ONGC, continues to be a central public sector enterprise (CPSE), its board members would continue to be appointed by the government.

Sources said the only question that remains is of the status of HPCL Chairman and Managing Director.

While ONGC's present subsidiaries MRPL and OVL are headed by Managing Directors with ONGC Chairman being the company chairman, there is a thought that HPCL Chairman and Managing Director Mukesh Kumar Surana may be allowed to hold his designation and the Coal India Ltd (CIL) model for governance of subsidiaries is followed.

CIL, the world's largest coal producer, is the holding company whose board is headed by a Chairman and Managing Director.

It has eight subsidiaries like Eastern Coalfields Ltd and Bharat Coking Coal Ltd, all of which have a board headed by Chairman and Managing Director. The CMDs of the subsidiaries report to CIL head.

Sources said if this model is followed, Surana will continue as Chairman and Managing Director of HPCL who would report to ONGC head Shashi Shanker.

Prior to the stake sale, the government made it clear that HPCL would continue to be a central public sector enterprise (CPSE), retaining its separate identity and brand and will be independently run by its board.

The alternate governance model has been thrown up as a large section in ONGC feels that HPCL should be governed on lines of the company's other subsidiaries like ONGC Videsh Ltd, which have an independent board and a Managing Director or CEO as heads. These heads of subsidiaries report to ONGC Chairman and Managing Director.

Sources said following the CIL-model of governance will save Surana, who is senior to Shanker, from a designation downgrade.