Billions Scam in ONGC
Shady deals, fraudulent transactions

Shady deals, fraudulent transactions and fishy connections are rampant across every nook and corner of state-owned oil exploration major Oil and Natural Gas Corporation Limited which is confronted with allegations of suspicions of bribery and kickbacksfor awarding multimillion-dollar rig contracts,acquisitions of material and technology and for over-invoicing.

After the famous Cell Tower Scams story broken by These Days in its February 8 edition, it yet again unfolds a glaring tale of day light loot in the government flagship company, ONGC. Highly placed sources in the company claim as many as 120 complaints have so far been shot off against the top brass of ONGC management to variousgovernment agencies, including the Prime Minister’s Office, petroleum ministry, the Central Vigilance Commission and the Central Bureau of Investigation.

In mid-2008 Shiv-Vani Oil and Gas exploration Services Ltd, an upstream services provider company, was awarded contracts worth Rs 1610 crores for deployment of eleven onshore deep drilling rigs on an integrated well completion basis for ONGC.Though Shiv-Vani completed mobilization of the first contract for supplying three rigs – two in Ankleswar and one in the Frontier basin, it however failed to keep deadlines for the remaining eight, despite repeated extensions. Its failure to meet deadlines led toinordinate delay in implementing major ONGC projects in Assam, Andhra Pradesh and Tripura.

The oil and gas major has imposed a fresh penalty of 0.5 per cent a week on the day-rates of the respective rigs beginning July 15, till the mobilization of the rigs is complete.Even though there were indications that the contract to Shiv-Vani may be scrapped if it fails again to meet the deadline the fact is that the deal is still on.

According to the sources, this is the sixth extensiongranted to Shiv-Vani though there is no dearth of suchrigs in the country. ONGC received proposals from anumber of other rig owners. But then, there is no reason to allow a contract or to extract windfall gains from the very act of getting a tender. If tenders are issued on the basis of criteria other than contract, windfall premia on the rig’s share transactions should be taxed away. A flawed policy of the ONGC.

While ONGC sources are maintaining a conspicuous mum on the re-tendering issue, sources in the rig industry told this Correspondent that the notice for EoI was a replica of the contract won by Shiv-Vani for msupplying rigs.“Such rigs are easily available in the market post meltdown,” a senior official in an Indian rig operating company said adding that at least three companies approached ONGC with queries if the company would be re-tendering contract in view failure by Shiv-Vani to keepdeadlines.

A senior ONGC official, however, maintained that the company was expecting Shiv-Vani to fulfil the contractual obligations as soon as possible. Although ONGC issued the relevant contracts, the officials kept extending the auction date.ONGC has taken preparatory steps for re-tendering the contract. If it was the Union Government, which forced ONGC to forgo larger part of the profits during the last oil boom, post meltdown the same Government control now comes in the way of the company in reducing its costs for hiring rigs and other equipment and services.

Due to procedural shackles because of its PSU status,ONGC is yet to take a view on a range of proposals forwarded by its consultant McKinsey & Company to extract better value from its vendors in the changed scenario.Even as anti-corruption group Transparency International has placed India's flagship explorer ONGC in the lowest tier for transparency in revenuedisclosures, sources close to ONGC said that the company had decided to continue with Shiv-Vani in view of the several financial and administrative obligations.

“ONGC has already made expenditures in facilitating the delivery of rigs by Shiv-Vani and it is difficult for the company to scrap the contract at this juncture,” a source said. In a bid to solve the problem and to complete rig mobilisation, ONGC, while giving extensions has also imposed a penalty on Shiv-Vani.ONGC has invited expression of interests from drilling contracts for supply of eight on-land rigs for E&P operations in Assam, Andhra Pradesh and Tripura.“Based on the information and availability of rigs,necessary action shall be taken for tendering,” thenotice said.

With the multi-billion rupees contract in its pocket, Shiv-Vani, sold equity to external investors for princely sums.
Shiv-Vani didn’t wait long before ‘auctioning’ off its licenses at 700% times of what it paid. Some observers feel the debacle costed the exchequer Rs 60,000 crore. While, Shiv Vani would have over inflated its earnings it is appalling to note that ONGC officials continue to jeopardize even the rig auction.Just this week, ONGC’s obduracy forced the relatedminister to clarify that the auction would indeed take place as scheduled—it’s now slotted for another extension. In the intervening period, the global credit crunch has already diluted the numbers India’s government was hoping to rake off this auction.

But, the concern minister knows better than to shrugoff even the reduced revenues in these strained times.It has been argued that this additional investment represented fresh capital infusion into the rig owners themselves and, therefore, their promoters could not lay their hands on the premium that investors were willing to pay for a rig license in the fastest growing petroleum market. There is a fair bit of obfuscation in this argument.

A lot of the blame vests with chairman cum managing director R S Sharma who was brought with a clear mandate to revamp the monolith and clean up themess. But Sharma 's aggressive plans to "reinvent ONGC" met with vehement opposition from a section of his own board members, trade unionists and the powerful oil drilling and platform contractors lobby.

Despite collecting an array of brickbats, he was re-inducted into the post when the UPA won a second innings. Most commentators put this decision down to the pressure of coalition politics. So it makes poetic sense that on the very day that the Congress got to strengthen its hold—via assembly results confirming it’s on a roll—there was a CBI raid on the ONGC office headed by Sharma. This follows up on the Chief Vigilance Commission expressing concerns about irregularities in the allocation of rig tenders.

Refusing to resign in light of the raids, the ONGC boss said that all his decisions on rig licensing had been based on procedures laid down by the union ministry.One cannot avoid cognizance of the fact that had the government used auctions to issue fresh rig licenses, the exchequer would have reaped the premium that investors were prepared to dish out for a drilling rig.

True enough, there is a plausible argument for notcarrying out auctions and issuing licenses on the basisof some other criterion. The number of rig owners is determined by technology's ability to use available rigs. Auctions cannot increase the number of competitors. It can only determine their identity. Sharma, apparently brought in to weed out corruption. is a lucky man

. Even with the erstwhile leaders of international finance as mocked as they are today, it is difficult to imagine any other job on the face of the planet where someone could lose Rs 60,000 crore for their employer and still be re-employed when their term came to an end.There are no two opinions about the fact that, instead of submitting to a transparent bidding process, the ONGC handed out rig tenders on their policy basis to companies that then sold them near-immediately at a profit — that enormous sum of money that should have come to the exchequer. The most charitable explanation for this is crony capitalism of the sort that rig licenses and permits invariably bring in their wake.

The rig corruption in ONGC warrants a high-level probe and appropriate action taken.Media circle is shy of carrying stories against the ONGS on apprehensions of losing out on lucrative ads that the oil and gas major doles out in kind to Newspaper and TV Channels.One should take cognizance of the sudden spurt in ONGC ads in the visual media. An appeasements of sort unveils the true character of the current-day journalism.