Skip to main content

Evading primary responsibility, ONGC decides to invest Rs 15,000 crore in sick subsidiary

By NS Venkataraman* 

It is reported that Oil and Natural Gas Corporation (ONGC) will infuse about Rs 15,000 crore in ONGC Petro-additions Ltd (OPaL) as part of a financial restructuring exercise. ONGC currently holds 49.36 per cent stake in (OPaL), which operates a mega petrochemical plant at Dahej in Gujarat. GAIL (India) Ltd has 49.21 per cent interest and Gujarat State Petrochemical Corporation (GSPC) has the remaining 1.43 per cent.
OPaL is reported to have incurred losses in the past due to lopsided capital structure with high-debt servicing cost. It is said that cost overrun due to delay in implementation of project is the primary reason for it incurring losses . Obviously, delay in implementation and commissioning of the project must have happened due to various reasons and perhaps, including some hidden reasons which have not been shared adequately.
Accumulated losses touched Rs 13,000.30 crore on 31st March 2023. As noted by the company's auditors, OPaL is "facing negative working capital of Rs 70,750 million as of that date. Net worth of the Company has reduced to Rs 6,207.99 million as at March 31, 2023 as compared to Rs 45,837.20 million as at March 31, 2022. In spite of these events or conditions which may cast doubt on the ability of the company to continue as a going concern, the management is of the opinion that going concern basis of accounting is appropriate in view of the cash flow forecasts and the plant management has put in place along with other facts."
The product basket of Opal include HDPE, LLDPE, Poly Propylene, Benzene, Butadiene, CBFC and Pygas. All the products are extremely important ones and with high relevance for the country’s industrial and economic growth. There are domestic supply gap for some of the products, which lead to heavy imports. Therefore, OPaL does not have issues in the marketing front.
Apart from the relevance of the products, the operating standards and product specification of ONGC are of reasonably good standards and there is no issue on this front also.

ONGC’s proposal

It is reported that ONGC would make additional investment that would convert Opal into virtually a subsidiary of ONGC.
While ONGC would spend Rs 15,000 crore in OPaL, there is no information in the public domain as to what would be the strategy to revamp the unit and place it on the path of profitability. This information is particularly necessary, since the product range of OPaL are extremely important and apparently there are no technical snags in operating the projects. Mere change of product mix by OPaL as part of revamping plan will not provide any significant reduction in loss.
There is considerable public curiosity about the future of this large project and why ONGC wants to make such a large investment in revamping this what appears to be “financially sick unit”.
In this scenario, the question is whether ONGC should pump further money of Rs.15000 crore in this project and whether alternate options have been examined without committing further money by a public sector unit like ONGC.
India’s production of crude oil and natural gas is not significantly increasing and ONGC is the principal player in India with the responsibility to boost the production of crude oil and natural gas by drilling more wells and optimising the yield.
The legitimate question is whether the focus of ONGC should entirely remain on oil drilling activity and enhancing production of crude oil and natural gas or should it’s funds be spent for revamping a loss incurring unit and with management time and attention being diverted in managing OPaL also.
Should it not be so that ONGC should spend its resources and time in fulfilling its primary responsibility of boosting crude oil and natural gas?

Privatisation proposal of BPCL

Recently, Government of India announced big plans for privatising Bharat Petroleum Corporation (BPCL) and invited bids. The government had announced BPCL sale in 2019 as it sought to raise record funds by offering majority stakes in state-owned companies to boost a slowing economy.
BPCL is a profit making company. There has been considerable valid criticism about the government’s move to privatise BPCL, since it was viewed as an attempt to provide the profit making company on a platter to Indian and foreign private investors. The question is not related only to private sector taking over a public sector unit but why the government should give up a profit making public sector unit which provides impressive returns to the government year after year.
The planned sale received three bids. However, the government had to stall the privatisation of BPCL since two bidders walked out due to volatility in the global oil market and may be unacceptable terms of the bid issued by the government. The Vedanta group alone stayed in the bid and offered to buy 53% of the government’s equity, spending around $12 billion. However, government did not want to proceed with only single bid available.
When BPCL sale viewed in favour, why not OPaL?
Obviously, Government of India has no objection in principle to privatise the public sector units, as seen in the case of BPCL.
In such condition, it would be appropriate to privatise loss incurring OPaL instead of further investing as high as Rs 15,000 crore by public sector unit ONGC , which has several responsibilities to fulfil and which are in the work in process stage now.
Government of India should be pragmatic in taking such decisions with regard to privatisation of sick units, as loss incurred by public sector units are effectively loss incurred by the government. OPaL management has been given adequate time to deal with the issue and it is time now to call a spade a spade.
While inviting bids for privatising OPaL , it is inevitable that the government has to provide some concessions such as facilitating writing off the huge interest burden and so on. This is the price that the government has to pay for mismanaging a large public sector unit like OPaL for several years.
In the case of loss making private sector units, the promoters would be hauled up and would face even humiliation. But, in the case of loss incurring public sector units, no one seems to be responsible!
---
*Trustee, Nandini Voice For The Deprived, Chennai

Comments

Anonymous said…
The report seems to be paid up by Banks or private companies who shall loose cream from loan interest. She has further gone wrong in suggestions of writing of debt to sale to private companies.

Entire article seems to favour private companies. Rest you can understand yourself and avoid it.
Anonymous said…
Fake suggestions
Anonymous said…
Reporter wants ongc to only focus on Oil drilling...and wants Privates to expand horizontally and vertically in oil.

Good level of reporting...
Anonymous said…
Nandni, voice of deprived is an NGO.
But it seems voice of Private & corporate.


Anonymous said…
It appears paid article.

All refineries have petrochemical vertical. It is wrong to say that Refineries should not invest in Petrochemical.

Similarly ONGC should also . In 2020-21, crude price reached $20 per barrel. Since ONGC was lucky to sustain low price due strong financial but can not be lucky always. Hence ONGC should have different vertical to hedge the risk.

Opal is in loss primarily due to interest on loan. Govt should support ONGC to revive Opal and save millions of job
.

One of the objectives of writer would to declare Opal sick and purchased by intended buyer.

TRENDING

Loktantra Bachao Abhiyan raises concerns over Jharkhand Adivasis' plight in Assam, BJP policies

By Our Representative  The Loktantra Bachao Abhiyan (Save Democracy Campaign) has issued a pressing call to protect Adivasi rights in Jharkhand, highlighting serious concerns over the treatment of Jharkhandi Adivasis in Assam. During a press conference in Ranchi on November 9, representatives from Assam, Chhattisgarh, and Madhya Pradesh criticized the current approach of BJP-led governments in these states, arguing it has exacerbated Adivasi struggles for rights, land, and cultural preservation.

Promoting love or instilling hate and fear: Why is RSS seeking a meeting with Rahul Gandhi?

By Ram Puniyani*  India's anti-colonial struggle was marked by a diverse range of social movements, one of the most significant being Hindu-Muslim unity and the emergence of a unified Indian identity among people of all religions. The nationalist, anti-colonial movement championed this unity, best embodied by Mahatma Gandhi, who ultimately gave his life for this cause. Gandhi once wrote, “The union that we want is not a patched-up thing but a union of hearts... Swaraj (self-rule) for India must be an impossible dream without an indissoluble union between the Hindus and Muslims of India. It must not be a mere truce... It must be a partnership between equals, each respecting the religion of the other.”

A Marxist intellectual who dwelt into complex areas of the Indian socio-political landscape

By Harsh Thakor*  Professor Manoranjan Mohanty has been a dedicated advocate for human rights over five decades. His work as a scholar and activist has supported revolutionary democratic movements, navigating complex areas of the Indian socio-political landscape. His balanced, non-partisan approach to human rights and social justice has made his books essential resources for advocates of democracy.

Four J&K MLAs visit Wular lake, pledge support to fisher community, environmental conservation

By Shamim Ahmed*   In a historic meeting that highlighted both environmental and social concerns, four Members of the Legislative Assembly (MLAs) visited Wular Lake to meet with the fisherfolk community, signaling a significant step in addressing their longstanding issues. This gathering, organized with the support of dedicated advocates, marks a strengthening of efforts to both safeguard the lake’s ecosystem and support the community’s welfare.

Swami Vivekananda's views on caste and sexuality were 'painfully' regressive

By Bhaskar Sur* Swami Vivekananda now belongs more to the modern Hindu mythology than reality. It makes a daunting job to discover the real human being who knew unemployment, humiliation of losing a teaching job for 'incompetence', longed in vain for the bliss of a happy conjugal life only to suffer the consequent frustration.

Supreme Court’s dismissal of PIL on Covid vaccine safety is counter to known science and mathematics

By Bhaskaran Raman*  On 14 Oct 2024, the Supreme Court of India dismissed a Public Interest Litigation (PIL) on the side-effects of the Covid vaccine. In 2021, the world saw the rollout of various Covid vaccine candidates. In India, Bharat Biotech’s Covaxin and Serum Institute of India’s Covishield were rolled out. Covishield was nothing but Oxford’s AstraZeneca relabelled in India. The importance of open-minded and scientific probe of Covid vaccine safety In 2020/2021, all Covid vaccines were authorized for emergency use, which meant that the necessary efficacy and safety follow-up was incomplete at that time. The originally approved trials – called randomised controlled trials (RCT) had a “vaccine” group and a “placebo” group for comparison. Such experimental comparison/control is the cornerstone of the scientific method – which even children learn in photosynthesis experiments in class-1. The vaccine trials were scheduled to conclude in late 2022/early 2023. For instance, Covax...

A Hindu alternative to Valentine's Day? 'Shiv-Parvati was first love marriage in Universe'

By Rajiv Shah  The other day, I was searching on Google a quote on Maha Shivratri which I wanted to send to someone, a confirmed Shiv Bhakt, quite close to me -- with an underlying message to act positively instead of being negative. On top of the search, I chanced upon an article in, imagine!, a Nashik Corporation site which offered me something very unusual. 

Right-arm fast bowler who helped West Indies shape arguably greatest Test team in cricket history

By Harsh Thakor*  Malcolm Marshall redefined what it meant to be a right-arm fast bowler, challenging the traditional laws of biomechanics with his unique skill. As we remember his 25th death anniversary on November 4th, we reflect on the legacy he left behind after his untimely death from colon cancer. For a significant part of his career, Marshall was considered one of the fastest and most formidable bowlers in the world, helping to shape the West Indies into arguably the greatest Test team in cricket history.

Will Left victory in Sri Lanka deliver economic sovereignty plan, go beyond 'tired' IMF agenda?

By Atul Chandra, Vijay Prashad*  On September 22, 2024, the Sri Lankan election authority announced that Anura Kumara Dissanayake of the Janatha Vimukthi Peramuna (JVP)-led National People’s Power (NPP) alliance won the presidential election. Dissanayake, who has been the leader of the left-wing JVP since 2014, defeated 37 other candidates, including the incumbent president Ranil Wickremesinghe of the United National Party (UNP) and his closest challenger Sajith Premadasa of the Samagi Jana Balawegaya. 

Unlike other revolutionaries, Hindutva icon wrote 5 mercy petitions to British masters

By Shamsul Islam*  The Hindutva icon VD Savarkar of the RSS-BJP rulers of India submitted not one, two,or three but five mercy petitions to the British masters! Savarkarites argue: “There are no evidences to prove that Savarkar collaborated with the British for his release from jail. In fact, his appeal for release was a ruse. He was well aware of the political developments outside and wanted to be part of it. So he kept requesting for his release. But the British authorities did not trust him a bit” (YD Phadke, ‘A complex Hero’, "The Indian Expres"s, August 31, 2004)