ONGC joint venture plans hit roadblock

Oil ministry raises objections

The ambitious plans of the Oil and Natural Gas Corporation to set up two joint ventures for downstream operations and acquiring modern vessels, tankers and aircraft have hit a roadblock with the petroleum ministry raising a number of objections.

The ministry has asked ONGC to examine the issues raised by it and furnish clarifications along with quantified data on the advantages of the proposed joint ventures and losses on account of the existing arrangements.

ONGC had proposed to set up ONGC Values Limited (OVaL) to take care of the entry barriers on its marketing operations of ONGC like acquisitions of properties for retail outlets and recruitment of experienced staff at attractive pay packages; and ONGC Peripherals Limited (OPaL) to ensure sustained availability of cost-effective, efficient, technologically advanced vessels, tankers and aircraft maintained by professionals.

Regarding OVaL, the ministry has said that the envisaged flexibility through the joint venture in buying properties for setting up retail outlets at a premium could lead to various complaints and consequential inquiries. "For acquiring properties quickly, ONGC could instead explore other options," the ministry has observed.

The ministry has also objected to ONGC's proposal of recruiting marketing staff for OVaL at salaries higher than those allowed under the PSU norms.

It has said this could lead to poaching on the talents available with other PSUs and would help one company at the expense of others. "Therefore, ONGC could consider appointing consultants or hiring retired people."

Moreover, according to the ministry, recruiting persons at higher than ONGC's salary structure would lead to demands from not only ONGC and ONGC Videsh Limited but also from other PSUs for revision of pay structures, the ministry has argued.

The ministry has serious reservations on the proposal to set up OPaL as well. It has said that the joint venture could land ONGC is a situation where the corporation will have to make the entire investment in acquisition of vessels and aircraft on its own without any guarantee for either pricing benefits or increased competition.

Therefore, according to the ministry, ONGC should examine as to why it cannot upgrade its maintenance and procurement systems.

The ministry has argued that while hiring services, ONGC can impose conditions of specific standards of services required, inspect the existing companies and discuss with the director general of shipping its specific requirements.