State-owned Oil and Natural Gas Corp (ONGC) will lose its coveted Navratna status (which gives it a degree of autonomy on investment decisions) as it prepares for its Rs11,500 crore follow-on public offer, scheduled for 5 April.
The government plans to withdraw both of its directors on the ONGC board to meet the Securities and Exchange Board of India's rules of reserving half of the directorships on the board for independent directors.
The move would lead to ONGC losing its Navaratna status that gives the company board autonomy to approve investment in its projects and up to 1,000-crore spending in a joint venture company. Under SEBI rules, a Navaratna company's board can exercise its powers only when it has government-nominated directors on board.
Upon withdrawal of such directors, ONGC will have to seek nod of the Public Investment Board (PIB) for any spending of over 100 crore.
The situation has arisen after a blunder by oil ministry in nominating independent directors on ONGC board.
ONGC has six functional directors, besides the chairman. It also has two government-appointed nominee directors, taking the total strength of functional/promoter directors to nine. Against this, it has four independent directors.