New Delhi: The Narendra Modi government might be keen to take a number of central public sector enterprises to the stock market, but it has put the plan to list ONGC Videsh Ltd (OVL) — the overseas investment arm of the Oil and Natural Gas Corporation — on the backburner.
The Modi government has decided to proceed with an aggressive disinvestment programme, with a revised target of Rs 1.05 lakh crore, but is not comfortable with the idea of launching an initial public offering for OVL.
“ONGC Videsh is still heavily dependent on the parent company for manpower and other critical operations. Though the company has registered strong financial performance, it may not be a prudent decision to list it as a separate entity at this stage,” a government official not wishing to be named told ThePrint.
Last year in December, ONGC was toying with the idea of listing the profitable OVL as a separate company. The proposal, however, did not see the light of the day as market conditions were not conducive.
The government has also decided, as reported first by ThePrint, to put on hold the proposal of merging public sector oil companies. The focus instead will be on increasing domestic production.
Sources said there will be no mergers of oil PSUs in the immediate future after the marriage between ONGC and Hindustan Petroleum Corporation Ltd (HPCL) led to multiple problems.
Also read: Modi govt likely to give up direct control of ONGC, IOC, GAIL, NTPC
Review of all projects
OVL has made investments in oil and gas projects in numerous countries, including Iran, Venezuela, Colombia and Mozambique.
Sources said the government might review all major investments made overseas by OVL to ensure that each of them functions smoothly, and avoid any disruption.
Last month, an informal ministerial group under Union Home Minister Amit Shah held a meeting to review the $2.2-2.4 billion investment proposal in Mozambique by the Bharat Petroleum Corp. Ltd. Besides Shah, the meeting was attended by Oil Minister Dharmendra Pradhan, External Affairs Minister S. Jaishankar, and Commerce Minister Piyush Goyal, among others.
Earlier, in the wake of falling global crude prices, Pradhan had raised concerns over investments made by public sector firms in the Rovuma Offshore Area-1 in Mozambique. The investments made during the UPA era were estimated at about $6 billion.
“There is a need for regular reviews by top level officials as these include huge investments overseas and there is little scope to go wrong,” the official quoted above said.
Amid rising geopolitical tensions, India’s total crude oil production has been a cause for concern. The country’s total crude production was 37.5 million metric tonnes in 2014-15, but has fallen to 34.2 million metric tonnes in 2018-19, leading to increased imports.
Also read: ONGC says it’s not facing a fund crunch despite falling cash balance
Retail investors in PSUs find that the government’s political compulsions often override the long term commercial interests of the corporation. In that sense, minority shareholders do not get a fair deal. SEBI is powerless to intervene. The government should be thinking of clean privatisation in place of these hybrid versions of disinvestment.