Hindustan Petroleum Corp Ltd (HPCL) Chairman and Managing Director Mukesh Kumar Surana will continue to hold his designation if the firm's new promoter, ONGC is to follow the Coal India Ltd-model for governance of subsidiaries.
ONGC last week completed acquisition of government's 51.11 per cent stake in HPCL for Rs 369.15 billion.
HPCL is now a subsidiary of ONGC and it has been speculated that Surana will lose the Chairman's tag and would be reduced to Managing Director who would report to ONGC Chairman and Managing Director.
Industry sources said this situation can be completely avoided if ONGC follows the Coal India Ltd's (CIL) governance model. 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 whom have a board headed by Chairman and Managing Director. The Chairman and Managing Directors 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 just 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. Last month, ONGC Chairman and Managing Director Shashi Shanker had stated that HPCL is "a good, professionally-run company and will continue to remain so". Sources said ONGC is likely to revamp HPCL board in coming weeks.
Currently, HPCL board has four functional directors before the Chairman and Managing Director. It also has two government directors on board and six independent directors.
ONGC, they said, may look at nominating one or two of its directors on HPCL board. Presently, ONGC has two major subsidiaries, ONGC Videsh Ltd and BSE-listed Mangalore Refinery and Petrochemicals Ltd (MRPL). Both OVL and MRPL have Manging Directors and CEOs as head who report to ONGC Chairman and Managing Director. On both the boards, ONGC directors have presence.
OVL Managing Director is a special invitee on ONGC Board. Sources said following the CIL-model of governance would save Surana, who is senior to Shanker, the blushes of a designation downgrade.