NEW DELHI: The oil ministry has initiated an inquiry to fix responsibility on directors on the board of state-owned Hindustan Petroleum Corporation (HPCL) for extending credit facilities to Kingfisher Airlines without a bank guarantee, defying government instructions. "Directors are expected to protect interests of the company and its owner (the government), not private firms," a senior government official said. The government holds a little over 51% stake in the company and exercises its ownership rights through the oil ministry.
Cash-strapped HPCL not only extended credit facilities to Kingfisher Airlines up to June 30 without recovering old dues, but also ignored the government's order that it invoke the Rs 250-crore corporate guarantee, he said.
Kingfisher purchased jet fuel worth over Rs 600 crore on credit from HPCL against a corporate guarantee given by its group company United Breweries & Holdings.
Alarmed by rising credit amount, the oil ministry asked HPCL to convene a special board meeting and stop credit facility to the airline in March this year.
The board met on March 30 but did not take any action against the airline. "Decisions of the board was not conveyed to us (the oil ministry) until recently," another official in the oil ministry said requesting anonymity.
"HPCL is following MoPNG (ministry of petroleum & natural gas) instructions," an HPCL spokesperson said.
The ministry has empowered minister of state for petroleum & natural gas Jitin Prasada to review functioning of government nominees in the state-owned oil companies' board. Boards of public sector companies have two or more government-appointed directors from their respective administrative ministries to protect the interest of the promoter (the government).
These government nominees on their board are supposed to inform their respective ministers about every development taking place in the company.
Mr Prasada said, asking for minutes of board meetings is in no way curbing their autonomy. "It is to keep me informed post-decisions (of the board). I'm answerable to Parliament and the public. I should not rely on media for information," he told ET.
"Companies can disclose minutes of the meeting to people under RTI (Rights to Information) Act, then why not to ministers," a Cabinet minister in the government, who didn't want to be named, said.
On March 4, 2010, old dues of Kingfisher stood at around Rs 602 crore, more than the net profit of HPCL in 2008-09 (Rs 575 crore). Kingfisher has so far paid about Rs 63 crore to HPCL against its dues.
ET had reported last week that the oil ministry was contemplating "appropriate" action against HPCL for defying its instructions. The issue was also raised by several members of Parliament (MPs) in the consultative committee meeting held in the first week of this month, another official in the oil ministry said.