There’s something about large Indian public sector undertakings (PSUs). Often the recipients of “autonomy”, these companies nonetheless remain under the government’s thumb. Perhaps it was this schizophrenic state of affairs that prompted Oil and Natural Gas Corp. (ONGC) chairman R.S. Sharma to tell The Wall Street Journal that “as a government company, I would say that we are overregulated”.
On the face of it, it may look as stretching the truth a bit. After all, since 1997, ONGC has been one of the Navratnas in the stable of otherwise stifled PSUs. The company has autonomy in forming strategic alliances with other companies, to source any technology it wants and incurring capital expenditure on equipment purchases without monetary ceiling. At the same time, however, ONGC is under the “influence” of at least 10 government departments.
In any mixed system of control (for example, government ownership and control versus private shareholder-driven corporate structures), the likelihood of acquiring the vices and discarding the virtues of the two systems is very real. ONGC is no exception. The government controls many pricing decisions, something that makes financial control tricky in the best of times.
Examples of such extraneous pressure could include orders to deposit “excess” cash with banks at a time when the latter are reluctant to lend and the downright irrational pricing of petroleum products that well up upstream from oil marketing companies back to suppliers of crude such as ONGC. Thus the profits belong to the government, while the losses…well, let us not talk about them.
The one place where government ownership could have paid off was diplomatic support in overseas acquisitions. In places such as Angola, Nigeria, Kazakhstan and Russia, where political clout is more important than financial muscle, there is scant evidence of that advantage. In fact, China, India’s main rival in securing energy resources overseas, has grabbed what it wants, leaving India empty-handed. This advantage is overrated: India has little leverage with countries with these natural resources. It has little to offer by way of monetary inducements or political traction,?either,?for?that?matter.
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