Post-merger, all refining units of ONGC will be accumulated under HPCL, making it India's third largest oil refiner after Indian Oil Corp (IOC) and Reliance Industries, Mr Pradhan said.
Making a suo motu statement in Lok Sabha, he said the Cabinet Committee on Economic Affairs (CCEA) had on July 19 given 'in-principle' approval for strategic sale of the government's existing 51.11 per cent stake in HPCL to ONGC along with the transfer of management control.
"For overseeing this transaction, CCEA approved setting up of an alternative mechanism, headed by Finance Minister, which will help in taking quick decision with regard to the timing, price, terms and conditions and other related issues," he said.
Mr Pradhan and Road Transport and Highways Minister Nitin Gadkari will be part of the ministerial panel.
Stating that the merger will be completed within the current fiscal year ending March 31, 2018, MR Pradhan said valuations and other modalities of the state will be strictly driven by the market regulator Sebi (Securities and Exchange Board of India) rules.
Valuation and transaction advisers will be appointed soon, he said.
"The proposed acquisition in the oil sector, will create a vertically integrated public sector oil major having presence across the entire value chain. This will give ONGC an enhanced capacity to bear higher risks, take higher investment decisions and to neutralise the impact of global crude oil price volatility," he said.
The acquisition of HPCL by ONGC will result in significant synergies in terms of optimisation of logistics costs, R&D activities, economies of scale of purchase of crude oil and optimisation in refinery operations.
After the acquisition by ONGC, HPCL will continue to be a central government public sector enterprise. "It can still maintain its cultural uniqueness and brand identity, distinct from ONGC," Mr Pradhan said.
"HPCL currently has 24.8 million tonnes per annum of refining capacity. Mangalore Refinery and Petrochemicals Ltd (MRPL) - a subsidiary of ONGC, has 15.1 million tonnes. After this deal, the entire refining capacity of ONGC Group will come under HPCL."
"So, HPCL will have 40 million tonnes of refining capacity and will be third largest in the country after IOC which has 69.2 million tonnes capacity and Reliance Industries which has 62 million tonnes," he said.
Mr Pradhan said MRPL will merge with HPCL but did not indicate timelines. "HPCL already has 16.96 per cent in MRPL. So there already is synergy there," he said.
ONGC owns 71.63 per cent of MRPL, a company it had acquired from AV Birla Group in March 2013.
HPCL plans to set up a 9 million tonne unit in Rajasthan as well as expand its Vishakhapatnam refinery in Andhra Pradesh. This will take the company to 50 million tonnes-plus category, he said.
For ONGC, the deal will bring to it assurance of market as well as greater capability to bid for not just oil and gas fields but also refinery and downstream projects abroad, he said.
"Previously, the issue was about supply security but the world over market security is being sought," he said, adding that HPCL controls one-fourth of the fuel retailing market in India.
HPCL as a brand with a separate board and its own identity will continue, he said.
Get the latest election news, live updates and election schedule for Lok Sabha Elections 2019 on ndtv.com/elections. Like us on Facebook or follow us on Twitter and Instagram for updates from each of the 543 parliamentary seats for the 2019 Indian general elections. Election results will be out on May 23.