Public Owned ONGC Buying Stakes At Rs 20,000 Crore Debt-Ridden Gujarat Firm GSPC, It Smells Of A Scam

ONGC Buying Stakes Of GSPC

There has been hardly any media coverage on how the state-owned Oil and Natural Gas Corp. Ltd (ONGC) has signed a preliminary agreement to take an operating stake in Gujarat government firm Gujarat State Petroleum Corp.’s (GSPC) KG basin gas block. In last one decade, the GSPC hasn’t yet started its commercial production.“In last one decade, the GSPC hasn’t yet started its commercial production.”

GSPC is keen to get ONGC on board to help tide over its difficulties in producing gas from the Deen Dayal fields, which a decade back was touted as the biggest discovery in India. Petroleum and Natural Gas Minister Dharmendra Pradhan has pronounced that these two companies are not at war and that they should merge.

A profitable PSU buying a debt-ridden company

But there remains a big question to answer that why would a public owned company (ONGC), that has a net worth of Rs 1.5 lakh crore, be buying GSPC, that has outstanding loans of Rs 20,000 crore. There is very little chance to extract any gas from GSPC’s reserves.

How it all started?

During 2005, PM Narendra Modi was the Chief Minister of Gujarat. In June that year, he had emphatically announced that the GSPC had discovered India’s largest reserve of natural gas in the Krishna-Godavari (KG) basin. It caught the surprise of the entire nation because it estimated 20,000 trillion cubic feet (TCF) of gas worth Rs 2,20,000 crore, which was bigger than Reliance’s discovery of 14 TCF in 2002. PM Modi had also promised that the production will start by December 2007, which will make the country energy independent, eventually by reducing the import bills. Over a decade after PM Modi’s declaration, the grim reality is that the GSPC hasn’t yet started its commercial production. Years of looking out for gas the company could not find anything. The CAG report, which was tabled in the Gujarat Assembly on March 31, noted that the total borrowings of the company, which were Rs 7,126.7 crores as on March 31, 2011, had jumped by 177% to Rs 19,716.3 crores as on March 31, 2015.

ONGC has to repay GSPC’s debts

GSPC today can produce 1.1 TCF of gas in KG basin, of the 20,000 TCF that PM Modi claimed in 2005. At current oil prices, this is valued at Rs. 3,000 crores by most industry experts. This means if ONGC buys GSPC, then it has to repay Rs 20,000 crore of GSPC’s loans to extract gas worth 3,000 crores.

A secret deal

The whole deal now seems to be kept secret and on the contrary to ONGC and public interests. The centre’s proposal is against the six lakh small shareholders of ONGC besides around 200 foreign and Indian financial institutions, who have invested in ONGC. Thus the money belongs to the shareholders.

Doubts raised on PM Narendra Modi

Going through the entire deal, a valid question can be raised on whether PM Modi, in his position, is using force on ONGC to acquire GSPC and thereby saving all the wrong doing of the then government? The petroleum ministry had asked Indian Oil Corporation and Gas Authority of India Ltd to invest in Adani’s LNG project in Dhamra, Odisha which was set up last year and has no assets.