NEW DELHI: When Mumbai-born Yasmine Hilton takes charge of Shell India in October, she will run the biggest multinational energy operation in the country, but she will have to steer growth in a policy regime that has exasperated state firms and Reliance Industries, and frustrated her suave and well-connected predecessor Vikram Singh Mehta.
Shell India has a thriving LNG business at Hazira that is running flat out and about to expand capacity, rapidly growing sales of jet fuel, bitumen and lubricants, a technology centre with 750 scientists and a finance centre with 1,500 chartered accountants and cost accountants.
“Shell today is the largest multinational energy company in India, with the broadest footprint,” said Mehta who built and led the operation in the past 24 years.
But the company has also faced setbacks under Mehta. It sold the oil-rich Rajasthan block at a throwaway price to Cairn, which drilled successfully and raised billions of dollars from the cheaply acquired asset, first with an IPO and then by selling the controlling stake to Vedanta.
Mehta says it was a “historic blunder” which he stoutly resisted for strategic reasons, but the company compelled him to sell it because oil prices were low and the asset was seen to be below the threshold level of profitability. His other disappointment is that the company hasn’t invested sufficiently in manufacturing facilities in India.
Taking the complex Indian operation forward will be Hilton, about whom the company doesn’t share much. She holds a PhD in genetics and has worked in a number of leadership roles across the Shell group, which she joined in 1979. She is currently in London as the chief information officer in the downstream business
Mehta says Shell India faces three challenges: to grow the existing businesses profitably, create new businesses to make significant contributions to the group as well as the economy, and to manage its 3,000 employees, who are talented and have aspirations.
A key challenge for the new boss will be the petrol pumps business, which Mehta says should have grown very rapidly but is struggling as competing state firms sell cheaper fuel because of government subsidies.
Shell, as well as Indian firms such as Reliance and Essar, has failed to persuade the government to allow market pricing of petrol and diesel. Mehta said the current pricing policy will cripple state-run oil companies and create a much bigger oil crisis than the one the government is trying to avert by freezing fuel prices. Several policy measures have troubled Mehta.
“I think that all of us, you or me, or anybody following this industry are quite bewildered at the number of times we take a shotgun and shoot our own foot,” he said.
Other concerns include changes in tax regime for gas fields and policy inaction.. “In the current environment, act of commissions is deemed to be more dangerous than act of omissions. People of scared of decision going wrong… Unless we improve, we are going to find that the drift is going to push us over the edge. It is a crisis.”
He says companies will invest in India if policies are right. “Why is it that we don’t have a policy that caters to demands of companies. There are companies flush with cash. Why are changing policy post facto. One day you give gas a seven-year tax holiday. You go around the world saying it, then couple of years later you change it.”
Operating in such an environment would be a challenge for Hilton. It was a difficult test even for Mehta. Most people would expect his formidable credentials to get any job done in India.
He was born in Switzerland, educated at St Stephen’s College,Oxford and Harvard. He joined the Indian Administrative Service and quit soon, sat on boards of big Indian companies, writes newspaper columns, and has been involved in running educational institutions and charities.
His family connections are enviable. His father joined the foreign service a day after India’s independence and rose to be India’s foreign secretary; his mother was India’s first woman to become a diplomat, while his grandfather was the Diwan of the princely state of Udaipur, who set up the Rajasthan’s biggest NGO and an educational institution.
Fittingly, it was in Rajasthan, under Vikram Mehta’s leadership, that Shell drilled four wells and found oil in three, but the prolific block was sold to Cairn cheaply. “The price was very, very low, so low that you can say we gave it away.
I fought tooth and nail against the decision from a strategic point,” he recalled. “The price of oil globally was declining and the industry worldwide was of the view that price would slip below $10.
The Economist had a cover-page with $5 written on it. Industry was re-jigging its portfolio, and reviewing all assets that didn’t meet the threshold level of profitability. Our exploration people compelled me to sell it. The rest is history. It was a huge disappointment, I won’t be able to forget it,” he said.
Mehta says he is stepping down after his long innings at Shell to do some thing new, but he hasn’t yet decided what that will be. “In Shell we don’t believe in retirement for very senior executives. There’s no push factor.
The pull factor is undefined. There are many areas I would look at: Private sector, board of companies I respect, or in the government, or social sector, or academics. I’m interested in all four. I’m not sure, where I’ll end up. I have no offer. Believe me, today I don’t have any idea where I’m going to be in six months.”