By R. Sasankan
The Niti Aayog – the government think-tank that the Narendra Modi
government created out of the detritus of the Nehruvian-era Planning
Commission – has started to spur controversies. Even before the furore
over the job data subsided, it has virtually shocked the petroleum
industry with its bizarre and ill-conceived proposal to find private and
foreign companies who could relieve the Oil and Natural Gas Corporation
of the responsibility of operating the largest oil and gas producing
fields.
Last week, the Press Trust of India, the country’s leading English news
agency, broke the story that “a high-level committee headed by Niti
Aayog vice chairman Rajiv Kumar late last year had considered
‘transferring’ western offshore oil and gas fields of Mumbai High,
Heera, D-I, Vasai East and Panna as well as Greater Jorajan and the
Geleni field in Assam, Baghewala in Rajasthan and Kalol oil field in
Gujarat to private/foreign companies.”
At a time when newspapers are awash with tiresome articles every other
day that eviscerate political personalities and their reputations ahead
of a bitterly-fought general election, it was but natural for print
media editors to pounce on the PTI story. The report gained some
credence as neither the Niti Aayog nor the Ministry of Petroleum and
Natural gas ( MoPNG) denied it.
So, it now appears that the Niti Aayog’s recommendation, which was
strongly opposed by the management of Oil and Natural Gas Corporation
(ONGC), met with resistance at the cabinet level as it could turn out to
be politically disastrous. But more importantly, it once again cast
serious doubts on the competence of the government’s policy think-tank
to develop a coherent strategy on vital economic issues. Its outlandish
suggestion on the ONGC fields proposes a remedy that is worse than the
disease.
Under the leadership of K.D. Malaviya, ONGC came up very well during its
formative years with its success ratio almost at par with the best in
the world. ONGC was helped immensely by the Russians in making almost
all commercial discoveries, starting with Ankaleshwar in the state of
Gujarat. The Russians had identified the precise location of Bombay
High, the country’s largest commercial oil field, and recommended the
spot where drilling should take place. The subsequent discoveries on the
west coast, such as Panna, Mukta and Tapti, were also made on the
advice of the Russians. The preliminary survey they did along with ONGC
officials indicated the presence of gas reserves on the east coast.
The problem with ONGC began with the discovery of Bombay High. The
Russians were practically bundled out. The development of Bombay High
threw open the opportunity for high value purchases and the irresistible
prospect of awarding high value contracts.
It wasn’t long before the canker of corruption fostered
kickback-oriented purchases and contracts, completely compromising the
political leadership and the senior executives of ONGC. Import of crude
oil was another source of funds for the ruling party. That is how the
ministry of petroleum and natural gas became one of the most attractive
portfolios for any politician keen on making money for himself and the
party.
Appointments to senior posts in ONGC were made on the basis of their
ability to raise additional resources for the party. I do not believe
that corruption was the monopoly of any political party. Successive
governments recklessly abused ONGC in order to make money for the ruling
party. Honest officials found it difficult to rise to the top. Even so,
a couple of competent officers rose to the top – but they had to close
their eyes to misdeeds.
The biggest tragedy that hit ONGC was the damage to its Bombay High
reservoir which happened during the accelerated production plan of the
1980s. I had the privilege of reporting on ONGC in those days. The
government, led by Mrs Indira Gandhi, was facing an acute balance of
payment crisis with the crude import bill being the largest item on the
list involving foreign exchange outgo. The big jump in domestic crude
production following the accelerated production plan brought a sense of
relief. However, crude oil production has to be in tune with the
character of the reservoir which had to be regularly monitored by
production experts. ONGC was headed by a former military official who
knew nothing about production. The senior executive in charge of
production [back in those days this worthy was designated as Member
(offshore)] was a structural engineer without any expertise whatsoever
in production.
The ministry of petroleum and natural gas set its face against any
proposal suggesting a cutback in production from Bombay High as the
country was going through a severe balance of payments crisis. The
upshot of this intransigent stand was that excessive production damaged
the sensitive Bombay High reservoir. The gas-oil ratio increased. ONGC,
which could have managed Bombay High with a maximum of 300 wells, ended
up drilling more than 900 wells on which it spent over Rs 300 billion.
It was during this period that a legendary production expert within ONGC
offered to put together a plan to double production from Bombay High at
a very low cost. The suggestion was brave and even cocky, but what
amazed me was the total indifference of the then ONGC management and the
political leadership to it. The cynic in me claims to know why everyone
was cool to the proposal: there was no scope for any kickback as the
offer was based on a low budget plan. I was the country’s only
journalist who had access to this plan. The ONGC official subsequently
opted for voluntary retirement.
My submission is that ONGC can still be revived and turned into a robust
company if politicians are not allowed to meddle in its affairs. The
company has to be fully professionalized. There are professionals even
in the present management.
What has privatization achieved in India’s oil sector? Precious little.
Under pressure from the IMF, the oilfields discovered by ONGC were
handed over to private companies such as Enron and RIL, Command
Petroleum and Hardy. They made profits with no value addition either in
terms of reserves or technology. Even the Barmer field, which now
belongs to Vedanta, was originally discovered by ONGC. To recommend the
same course for the remaining fields of ONGC is nothing but a blatant
attempt to kill the public sector company which, despite all the ills,
still remains a blue-chip company. There is no evidence to suggest that
there will be any appreciable gain to the government by selling these
fields to private players.
The Niti Aayog ought to have come up with certain short-term measures to
streamline ONGC’s operations. It should have baulked at the idea of
re-moulding the organization. A short-term package can be worked out
with the help of some outside professionals, if necessary.
The truth is that crude is stolen from ONGC in a myriad ways and its
performance can easily be improved at least by 25 per cent cumulatively
by halting theft, improving operations, enhancing exploration and
slashing its bloated and overpaid bureaucracy. These are the reasons why
ONGC Videsh Ltd (OVL) on paper looks better than its parent. But even
OVL finds itself upstaged when it comes to striking deals by entities
like Imperial Oil.
The solution does not lie in selling its oil fields. The answer is to
reform the Public Sector and bring in professionals who can stand up to
politicians and be rewarded for competence and performance instead of
kowtowing to their political masters. So I am glad that good sense
prevailed and the plan to sell off ONGC’s biggest exploration assets was
abandoned. The present ONGC management deserves to be congratulated for
resisting the move to undermine the raison d’etre for its existence.
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