New Delhi: Oil and Natural Gas Corp. confirmed acting chairman R.S. Sharma to lead India’s most profitable company after a 14-month recruitment drive failed to attract a single applicant from the private sector due to low pay. Sharma, 56, got approval from the Prime Minister’s Office on Wednesday, replacing Subir Raha who stepped down in May 2006. The government owns 74.14% of the shares of Oil & Natural Gas Corp. (ONGC). All 71 applicants for the post were from the government, or the public sector, Raha said. Sharma wouldn’t comment.
Raha earned about $20,000 (Rs820,000) in his final year at ONGC, less than two days’ pay for Exxon Mobil Corp. CEO Rex Tillerson. ONGC says it plans to increase pension payments and medical benefits because the government caps wages atstate-run companies and attrition has increased sixfold in two years. “It’s a very telling commentary on public sector compensation and image. Public sector has become a place where people come to pick up a good CV,” Raha said in a phone interview. “Anyone who is working hard is getting daily offers and those who are staying back are guys who don’t have any offers.”
Employee attrition at government companies is impairing growth at a time when private sector rivals are expanding. Since Raha stepped down, ONGC lost its ranking as India’s most valuable company to Reliance Industries Ltd., headed by Mukesh Ambani, the nation’s richest man.
Sharma was refused confirmation in February because the government wanted to attract private sector applicants, oil and petroleum minister Murli Deora had said. The government placed ads in local newspapers inviting non-government employees to apply for the job.
The applicant, at least 45 years old, should have experience in senior management “in a large organization of repute,” the ads said.
State-run Indian companies have traditionally had chairmen who have served in government companies for decades. Raha retired last year after 35 years in the industry. ONGC’s net income in the year ended 31 March was Rs15,643 crore ($3.9 billion).
Irving, Texas-based Exxon earned $39.5 billion, or 10 times more last year. Its chief executive Tillerson was paid $4.782 million, including salary and bonuses, or 239 times Raha’s pay, according to Bloomberg data.
In the year ended 31 March, ONGC’s profit was 43% more than the Rs10,908 crore at Reliance. A year earlier, Reliance’s chairman, Ambani earned Rs24.51 crore, according to the company’s annual report, or 300 times Raha’s pay.
The headcount at ONGC fell to 33,773 as of 31 March, compared with 36,700 two years earlier, human resources director A.K. Balyan said.
In the last 18 months, 370 mid-level managers have left the explorer, compared with 50 or 60 who would have quit two years ago, he said. Mostly geoscientists and engineers are leaving, with the majority going to West Asia, Balyan said.
“When people with 10 to 15 years of experience leave, it creates a void. The trend is alarming,” Balyan said. “It is in critical areas—people who have 10-15 years of experience and command a good market value.”
Graduates recruited out of college typically quit state-run companies after about 10 years, before the companies have earned adequate returns on their investment in them, said Ashok Singh, president, Oil Sector Officers Association, which represents 45,000 supervisory staff in state-run oil and gas companies. “Knowledge migrates to the competitors. Instant vacuum is created in the organization.”
Singh has petitioned the government to allow companies to spend at least 5% of their revenue on wages from 1% now. Reliance, operator of the world’s third largest oil refinery, spends 8% of sales on salaries, said Singh.
Annual salaries of chief executives of all state-run companies listed on the Bombay Stock Exchange’s benchmark index Sensex added up to $81,970 in the year ended 31 March 2006, less than 2% of Reliance Industries billionaire chairman Ambani’s pay, according to Bloomberg data.
“The crisis is already staring at us in the face,” Raha said. “ONGC is facing problems retaining drillers to work on their platforms. They are either joining private companies in India or going overseas with five times the salary. It’s becoming impossible to retain talent.”