When ONGC ran out of cover

Rational Expectations

Over the next few years, the exercise will be repeated for the rest, most of which are over twenty years old, and are in need (some dire) of repair.

For starters, last year, after some level of repair, each of the manned platforms was certified fit by third party consultants "" believe it or not, the fitness certificates had lapsed for a large number of the platforms, but no one had noticed! The re-certification of the 120 or so unmanned platforms is in the process of being done "" indeed, all major installations have got ISO 14001 certifications, and another 30 are in the process of getting it.

This, of course, is just one of the many believe-it-or-nots that Subir Raha encountered when he took over as ONGC's chairman and managing director towards the end of May 2001.

Though he'll never admit it, Raha's probably happy the ONGC unions went on strike on safety issues (after the copter crash) only in August this year, and not a year ago, because at that point the lack of safety was a real issue!

Indeed, from April 1, 2001 to May 10, 2001, ONGC did not have any insurance cover for its $14 bn asset base. Had any accident taken place during this period, apart from the danger to lives, there would have been no compensation from the insurance companies.

Even after the insurance had been renewed, when an internal safety audit was carried out in September 2001 of the offshore supply vessels (OSVs) that were used to ferry supply to ONGC's offshore platforms, it was found that the chiefs and second-in-commands of seven of these vessels did not have legitimate licences "" so, if they damaged a structure while piloting the OSV, the insurance companies could refuse to pay the claims.

The operators' contracts were cancelled, naturally they got a stay against this in some court, but fortunately ONGC won the case at a higher bench. The same audit, by the way, found that the fire-pumps were not working on 89 of 105 unmanned platforms "" the officers responsible explained this away saying the pumps were not really needed anymore!

It is because of this casual attitude towards safety, in fact, that ONGC's insurance premia has been rising steadily "" from $ 10.7 million in 1999-00 to $ 51 million in 2002-03. Once the safety measures were put in place, and well-reputed third-party consultants were hired to certify that the safety levels had indeed become better, this premia reduced this year to $ 36.6 mn "" since some assets were removed from this policy, on a like-to-like basis, the saving in premia is around $ 7.5 mn, or around 14 per cent.

The results speak for themselves. While ONGC had 209 accidents in 1993, and these went down to 133 in 2001-02, these further declined to 81 in 2002-03. Claims from insurance companies, another indication of just how safe operations are, rose from $ 8.7 million in 1993-94 to $ 98.2 million in 1998-99, and then fell to zero in 2001-02 and 2002-03.

Of course, a lot still needs to be done, and even according to ONGC's figures, around a third of the safety recommendations made in the March 2002 audit are still under implementation.

So, if ONGC's safety has been improving dramatically, what was the motive behind the strike call on August 8 after the tragic helicopter crash in which 27 people lost their lives "" the strike call, of course, was not made by the main union, the ASTO, but by the ASTO's Mumbai branch only.

Well, as any ONGC insider will tell you, despite being the human resources director for Indian Oil Corporation before he became ONGC chief, Raha's handling of people leaves a lot to be desired. The day he took over, on May 25, 2001, he sent out a welcome note to all ONGC's 42,000 employees explaining his concept of the various 'Cs' they needed to work upon "" one of these was avoiding Corruption.

This was followed up by a new year message giving specific instances of this Corruption. One case dealt with how the specifications in a very high value tender had been fixed in such a manner so that only one particular firm could bid for it.

Upon checking, Raha's new year message goes on to say, he was told the outside consultant had recommended the changed specifications. So, the consultant's report was called for, and this recorded very clearly that the specifications had been changed by ONGC staffers! The bid was then cancelled, and a new one floated, with ONGC losing a year in the bargain.

Now, this is not the first time officers have made money by fixing contracts in a certain manner, but this is probably the first time a chairman's new year message has exposed the details so explicitly! A message that, incidentally, also says that of the 147 cases of alleged corruption being examined by ONGC's chief vigilance officer (CVO), 64 were referred to the CVO by the chairman himself!

To get back to the call for a strike by ASTO's Mumbai branch (which was called for after beating up the all-India ASTO president who didn't think a strike was justified), what were their demands?

Apart from reviewing of offshore logistics and transport contracts with a view to replace outdated helicopters, and wanting increased cash compensation and jobs for the families of those killed in the crash, they wanted an 'immediate waiver of income tax on offshore compensation allowances' (typically these form a third of their salaries) and 'immediate recruitment of ... manpower and clearing the backlog'! (Raha put a freeze on recruitments two years ago because ONGC is vastly overstaffed, and has an amazing 22,000 officers as compared to 19,000 non-officers "" in comparison, most organisations have an officer-to-staff ratio of 1:4 or 1:6) Imagine that, 27 of your colleagues have just died, and the union is asking for salary hikes and unfreezing of recruitments! And you thought it was about compassion and concern for safety.

suniljain@business-standard.com