ONGC tears into privatisation proposal

NEW DELHI: The tug-of-war between state-run Oil and Natural Gas Corporation (ONGC) and the Directorate General of Hydrocarbons (DGH) over the latter’s proposal to sell 60 per cent stake in 11 hydrocarbon blocks of the public-sector explorer has taken a fresh twist. According to reports, the mega oil company has told DGH that national oil companies (NOCs) can raise production if they are offered the same fiscal concessions being extended to private companies.

DGH has identified 15 discovered and producing fields, saying private involvement could raise output.
In comments on the DGH proposal to auction 60 per cent stake in some producing oil and gas fields of ONGC and Oil India Ltd, ONGC said NOCs should also be allowed to participate in the auction.

The New Indian Express contacted Ajay K Dwivedi, director (exploration), ONGC, but he declined to comment on the matter. Other sources said the government should not differentiate between public and private companies. “The government should give equal incentives to public companies as they have proposed to give to private companies,” said a top official.

According to ONGC, the fields “may be offered to NOCs in case an NOC assures that it would raise production by working out financial viability of the field extending incentives like lesser royalty and no cess to the NOC”.

The DGH has proposed to auction the fields to the bidder who commits the highest investment and pledges the largest share of its net revenue to the government.

The bidder, who would pay reduced royalty and be exempt from payment of oil cess and import duty on capital goods under the Hydrocarbon Exploration and Licensing Policy, would get 60 per cent equity in the field and receive 60 per cent of the net proceeds from sales from the fourth year after production. ONGC said the provision of the selected bidder getting 60 per cent of net proceeds from sales should apply only when output rises above a pre-decided base profile.

Privatisation of oil fields has become a heated topic in the power corridors of the country. Many experts see it as an attempt by the government to increase private players’ participation in the highly lucrative sector. “Why privatise the ONGC when it is doing relatively better? Taking away its rich fields might leave it in a very difficult situation,” said an oil sector expert who did not wish to be named.