Folly, accident or conspiracy?

Oil, PSUs Death & Jobs

By Shivaji Sarkar

Air, petro, telephony and job crises are putting the country at risk. America’s nonchalance is adding to India’s economic concern. The US, at the back of withdrawal of zero-duty entry for Indian exports, imposed the sanctions prohibiting purchase of oil from Iran. It is a move said to exert maximum pressure on Iran for following the US dictat on nuclear issues. The Donald Trump administration pulled out of the landmark 2015 nuclear deal.
The move hurts India the most as Iran is the fourth-largest oil supplier after Iraq and Saudi Arabia. Iran supplied 23.5 million tonnes of crude oil in 2018-19 at a price and credit facilities no other suppliers offer. India imports 80 per cent of its oil and 40 per cent of gas, as domestic production has been declining for the last few years.
The price of Indian basket, combination of Dubai, Oman and Brent crude, has been rising. The US move will further increase the oil prices. It will lead to severe inflationary situation in India.
The move should also be looked into the background of Saudi Aramco’s bid to capture 25 per cent of RIL petro business. The stake sale may fetch $10.5 billion to debt-ridden Reliance, but it impacts the move for India’s self-sufficiency apart from the high cost of repatriation of profits at a time the country is striving to maintain its BoP.
Indian refiners are increasing dependence on OPEC, Mexico and even the US. In short, the US move is designed to benefit itself and its stakes in its allies. Indian diplomacy of hugging dignitaries has not helped itself.
The Jet Airways grounding and deepening crisis of Air India is further impacting the economy. Air fares are shooting up at a time when the Indian Railways, despite efforts, is not performing at its best. The cost of travel and goods transportation is shooting up. Even international travel is bleeding airlines due to Pakistan ban on its airspace. It also reduces India’s capacity. The licence for international travel now remains blocked with Jet. Air India is unable to use it for its sickness.
The Jet is a classic case. It shows that seemingly thriving organisations may be in the throes of a crisis. The BSNL, the official, telecommunication backbone is losing on its clientele because of poor services and heavy losses. The management says they do not have the cash flow to pay salaries to its 1.68 lakh employees. A sick BSNL, with about Rs 90,000 crore losses, according to Kotak Equities, may end the affordable communication and digital boom that the country has seen for the past few years.
The telecom backbone of private companies were forced to be provided by the all governments be it the Congress or others by BSNL. It is a folly of the Manmohanomics that forced public sector giants to go into red for the benefit of private capital.
Another classic case is of the international oil giant public sector ONGC. It was developed since 1950s as key to energy security. The Congress regimes since 1990s chipped away at the company in favour of private businesses looking to dig into profitable oil and gas sector.
In 1992-93, 28 prime oil and gas fields discovered and developed by ONGC, despite protests from think tanks like the Planning Commission, were given away to private businesses for a song. In 1991, the government forced ONGC to take a loan of $450 million from the World Bank, which then told ONGC and Oil India to go into joint ventures with private and foreign capital— an unnecessary condition.
That was the beginning. In between a private company virtually drilled out gas from ONGC field. The litigation has not helped the Corporation. It was also forced to shell out Rs 8,000 crore to help loss-making Gujarat State Petroleum Corporation to exit the Krishna Goadavari basin in 2016. The GSPC could not find gas in its fields and the losses were dumped on ONGC.
The oil ministry tried to push ONGC to sell 60 per cent stake in its oil and gas fields. However, the tough stance of the company saved it. In 2018, the cash levels in ONGC came to a critical low. This reduced by 90 per cent in a year and is now under a huge debt.
Even Ruia’s Essar deal with Russia’s Rosneft is stated to have caused severe losses to ONGC. The Essar sold its 20 million tonne refinery to Rosneft at a high price of $12.9 billion, stated to be the single largest Russian investment in the world, including acquisition of Gujarat’s Vadinar port for $2 billion.
The deal is peculiar. Prior to this ONGC-IOC-BPCL signed for purchase of Russia’s Vankor oilfield at an exaggerated price despite its falling production. A fellow with Russia and Eurasia programme at a policy base institute, Chatham House, Lilia Shevotsova is quoted to have remarked that the Indian purchase looked very unusual for Russian observers because the buyers definitely overpaid as the purchase was done in situations of US sanctions. The ONGC Videsh sought renegotiations in 2016 but ended up paying an unprecedented interest payment.
So if India is losing jobs, its public sector is collapsing and private sector is “thriving”, there is much that does not meet the eye. The telecom, oil, aircraft manufacturing and many other works done by the public sector profitably, are gravely under threat. There have even been questions on the closure of HMT some years back instead of strengthening its operations. Its exit has helped watch manufacturing and other tool and instrumentation companies, once rivals of HMT.
There is nothing wrong in private sector rising, but should it be at the cost of manipulating losses of the public sector? Private gain is not an eyesore, but the process takes the wealth away from the people of the country to some chosen hands, may be in a particular region.
A pertinent question arises: Is the public sector really at folly or the private sector is being made to thrive at its cost, particularly since 1992? This raises many questions for many international deals. So if the rupee is in crisis or repatriation of profits to foreign shores is increasing, it calls for a holistic look at policies. It is a national crisis, needs careful, immediate treatment and a detailed probe. The next government has much on its plate.—INFA