ONGC, IOC & BHEL Preparing For A Change Of Guard

The winds of change are blowing, and strongly at that. On one side, the political climate of the country is changing fast, and on the other, the economy is also going through a transitional phase. With the leaders at the helm of the country all set to change next year, the public sector is also going through a turbulent phase. Owing to superannuation of CMDs, a major rejig in the top management of three most valuable Maharatnas of the country, viz. ONGC, IOC and BHEL is due around now.

Naturally, it is important to analyse the potential impact of such a change on the companies’ performance. Though the current incumbents of at least two companies, i.e. ONGC and BHEL are hoping for an extension, it now seems less likely that their stint will be extended in spite of the weight respective ministries have put it behind them.

Sources from the Department of Public Enterprises & Public Enterprises informed DSIJ that a note by the Minister of Heavy Industries Praful Patel regarding giving extension to the current BHEL CMD BP Rao (who is retiring on December 31) has been moved by the Ministry. However, the past record of the UPA regime suggests that may be unlikely that Rao’s services will be extended.

The Union Cabinet is still to consider the Ministry’s proposal regarding the fixed 3-year tenure of services for the CMD and the 2-year extension for outstanding CMDs. But ministry and top executives in the company is quite hopeful about such extension being allowed.

An executive of the company, on condition of anonymity said, “Presently, BHEL is in troubled times and going through a diversification process to become Rs 1 lakh crore company by 2017, and for this, a strategic plan is underway. In such a situation, stability at the top is much needed.” It is important to note that due to the slowdown in the power sector, the present situation is quite crucial for the company as its topline, bottomline and order book has been hit and it is planning to diversify into railways, solar power equipment and other sectors. In such a scenario, any change in the top management can certainly derail the consolidation process.

Another important point regarding BHEL’s succession plan is that the CMD designate Prakash Chand is an Executive Director in the company and doesn’t have any experience as far as the Board process is concerned. The Ministry is citing this as an important reason for extension of Rao’s service by another year so that Chand may be guided well by his senior.

Similarly, CMD Sudhir Vasudeva of India’s most valuable company, ONGC, is attaining superannuation in February 2014, and the MD of ONGC Videsh, Dinesh K Sarraf has been chosen to succeed him. Though Sarraf has ample Board experience as he was Director (Finance) of ONGC earlier, the Ministry of Petroleum and Natural Gas is eager to give Vasudeva an extension. The reason being stated for this is that ONGC is undergoing a process of transition and many new initiatives have been undertaken recently, and having same leadership would help to achieve the anticipated results. This case is also pending with the Cabinet. A government official, in conversation with DSIJ, said that regardless of the Ministry’s will, it is not very likely that Vasudeva will get an extension as it will set a precedent and a new kind of lobbying on this account would start across country by PSUs executives.

Also in line here is R S Butola, CMD, Indian Oil. Butola is slated to retire in May 2014, and Executive Director B Ashok has been chosen by the Public Enterprises Selection Board (PESB) to succeed him. The company, India’s biggest OMC, is also going through new initiatives like completion of the strategically significant Paradip refinery pipeline network, and Butola’s leadership is crucially needed at this juncture. In addition to this, the pressures on account of the subsidy burden are known to everybody. In such a situation, how passing the reins on to a person currently at the ED-level would work out is something only time can tell.

It is interesting to note here that MK Goel, the CMD of Navratana company Power Finance Corporation (PFC) has been cleared by the government to assume the full-time charge. Till now, Goel had additional charge of CMD that was vacated at the end of Satnam Singh's term of 5 years.

Whatever be the outcome of this kind of lobbying by the Ministries, the Maharatnas will be on tenterhooks. Considering the reputation of Prime Minister Manmohan Singh, who is not very keen to give any extension after attaining superannuation, it seems likely that all the three PSUs juggernauts will have a new leadership within the next 6 months.