Govt looks to create consultancy giant through merger of PSUs

After oil and power sectors, the government now plans to create a public sector consultancy giant by bringing together about half a dozen smaller engineering companies and merging it with much larger and profitable Engineers India Ltd (EIL).

There are close to a dozen public sector undertakings (PSUs) that provide a range of consultancy services — from education, water services to engineering, procurement and construction (EPC). EIL is the biggest state-owned PSU which provides turn-key engineering solutions to projects in India and abroad.

Government sources said that now discussions would be initiated to explore if merger of engineering and consultancies PSUs working in similar areas such as Engineering Projects (India) Ltd, MECON Ltd, Telecommunications Consultants (India Ltd) and WAPCOS could bring about operational synergies that could create a PSUs consultancy giant that can take on competition worldwide and establish India’s footprint in the global business of project consultancy.

Merger of Projects and Development India Ltd (PDIL) could also be considered but EIL last year has dropped its plan to acquire 100 per cent government equity in the company.

“This is an idea that is being considered as government also wants to limit its presence through PSEs to just core areas while privatise or merge entities in others,” said the government sources quoted earlier. Sources in EIL said that they are yet to receive any blueprint on proposed consolidation exercise from the government.

As part of Rs 20 lakh crore economic package, finance minister Nirmala Sitharaman had said that a new PSE policy is being finalised where the number of enterprises in strategic sectors will ordinarily be only one to four, while others will be privatized/merged/brought under holding companies.

It would be a step forward in the direction of bringing about consolidation in the public sector. We feel there should be one mega-consultancy company providing services across portfolios, said an official in the oil ministry privy to the development.

While the plan to merge entities and consolidate consultancy operations under one entity would be worked out by disinvestment department DIPAM, government proposes to hold inter-ministerial talks first to bring about clarity on entities participating in this consolidation drive which are under administrative control of different ministries.

It is not clear whether railways consultancy arms Ircon and RITES would also be included in the proposed merger. The merger would create an entity with capacity to bear higher risks, create more value for the stakeholders and take on the might of global giants like Bechtel and domestic majors like Larsen & Toubro (L&T), ABB with a stronger bargaining power for projects.

Among the initial list of entities under consolidation plan, Engineering Projects (India) provides turnkey execution of projects in the infrastructure space while Telecommunications Consultants (India) does similar work in the telecom industry at home and abroad. Similarly, WAPCOS gives consultancy in water, power and infrastructure related projects. MECON provides technical consultancy and project implementation services in the infrastructure sector. Former finance minister Arun Jaitley in his Budget for 2017-18 had spoken about mergers and consolidation in the public sector. In this line he had also talked about merging oil companies.

Government has already completed merger of HPCL with ONGC, REC with PFC and NEEPCO and THDC with NTPC. More such exercise would be pursued this year. The proposal to merge consultancy and EPC firms was also taken up by the last UPA government. But the proposal did not move forward as EIL, where government holds 51.5 per cent stake, was reluctant for a merger. It is rather looking at diversifying and expanding portfolio of services on its own.

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