They cannot be made a source of private profit
Crude oil and natural gas are valuable non-renewable natural resources. They are the raw materials used in the production of all petroleum and petrochemical products. Their planned use to meet social and economic needs of the society is particularly important due to their very limited availability in our country. However, instead of focusing on the optimum utilisation of our oil and gas reserves for the benefit of society, successive governments headed by the BJP and Congress Party have been busy privatising oil and gas exploration and mining over the past three decades.
The domestic production of crude oil met 65% of the country’s requirement in 1985. Today it meets only 17% of the requirement. Crude oil production in 2018-19 was 34.2 million tonnes, while crude import was 212 million tonnes. Production declined further to 30.5 million tonnes in 2019-20. Domestic production of natural gas meets 45% of the country’s requirement.
Over 70% of crude oil is produced by the two public sector oil companies, Oil and Natural Gas Corporation Ltd (ONGC) and Oil India Ltd (OIL). ONGC accounts for over 85% of oil produced by public sector companies.
In the private sector, Mukesh Ambani owned Reliance is the major gas producer from the Krishna-Godavari gas fields and Anil Agrawal owned Vedanta is the major producer from Barmer oil fields in Rajasthan.
ONGC has been among the highest profit-making and dividend-paying public sector companies. For that reason, it has been designated a ‘maharatna’ (superstar) public sector company. In the last five years it made a total profit of over Rs. 94,000 crore and paid total dividend of over Rs. 38,000 crore. It has assets of over Rs.4.23 lakh crore and employs over 30,000 workers.
ONGC’s subsidiary, ONGC Videsh Ltd (OVL) has been prospecting for oil and gas in foreign countries for the last 60 years and has invested over USD 28 billion (Rs. 210,000 crore) in 39 oil and gas fields in 19 countries.
OIL is the oldest oil company of the country, with its operations based in Assam. It was formed as a joint venture between Assam Oil Company (AOC) and the Government of India in 1959. AOC has been producing and refining oil since 1901. It accounts for nearly 10% of oil production of the country.
The first step towards privatisation of ONGC was taken in 1991 when the Indian government forced ONGC to take a loan of $450 million from the World Bank. One of the conditions of this loan was that oil fields discovered by ONGC and Oil India would have to be developed as joint ventures with private and foreign capital.
Soon after that, the sale of oil fields discovered by ONGC to private players began. In 1992-93, 28 fields discovered by and belonging to ONGC were privatized using the argument that private capitalists will bring in “world class technology” to increase production of oil and gas.
In 2017, the Directorate General of Hydrocarbons, the regulatory body under the Ministry of Petroleum and Natural Gas, recommended that the government should sell off 60% stake in 11 prime oilfields of ONGC to private companies. The 11 ONGC fields suggested for privatisation included four of ONGC’s biggest oilfields in Gujarat — Kalol, Ankleshwar, Gandhar and Santhal.
In the current year, the Petroleum Ministry is reported to have decided to hand over 7 large ONGC oil fields in Sibsagar district of Assam to private players. All these seven oil fields are very productive. Crores of rupees have been spent under the Assam Renewal Project to modernize and upgrade the production capacity of these fields. The Petroleum Ministry has not only proposed to lease them out to private parties for exploration and production for 15 years, but also to give them rights over marketing their product. This has met with strong opposition by ONGC workers as well as the people of Assam.
Another strategy adopted lately is to turn ONGC into a sick enterprise to justify its complete privatization. ONGC has not only been forced to exhaust its accumulated cash reserves, but has also been forced to accumulate a mountain of debt due to unnecessary acquisitions that it was forced to make by the government.
In Aug 2017, ONGC was forced to bail out the debt-ridden Gujarat State Petroleum Corporation (GSPCL), owned by the Gujarat Government, by acquiring the entire 80% government stake for about Rs. 8,000 crore.
The GSPCL had a debt of Rs. 19,576 crore, for which it paid interest of Rs. 1,804.06 crore per year. It acquired a gas field in the Krishna Godavari basin, off shore in the Bay of Bengal, in 2003. In 2005, the Gujarat State Petroleum Corporation claimed that the Krishna Godavari basin block was the discovery of the century for India. However, no gas has been produced till today. Making ONGC pay for it is clearly a waste of public money.
In January 2018, ONGC was forced to purchase the central government’s entire 51.11% equity stake in Hindustan Petroleum for Rs. 36,915 crore, at 14% higher than the market price. This purchase pushed ONGC into high debt. It was compelled to borrow Rs. 35,000 crore. ONGC was a debt-free company since 2001-’02. It was able to meet its entire capital requirement for exploration and expansion out of profits it made till then. Now even for its working capital needs, it needs to borrow.
Crude oil and natural gas are strategic sources of energy for the society. They are part of the shared inheritance of the people of the country. The state has no right to gift or sell this inheritance to private companies. It is the duty of the state to ensure that this valuable resource is used optimally for the common good.