SLIPPERY SURFACE - ONGC has been handed over on a platter to American conglomerates

Cutting corners / Ashok Mitra
The Telegraph, 19 March 2004

The Centaur Hotel scam was obviously a trial run. Sell off a public property to a private party at a ridiculously low price, a price that has no relationship with market realities. Allow a gap of three months, the private party which bought Centaur at Rs 73 crore would now sell it to another private party at Rs 116 crore, thereby making a whopping profit of 50 per cent in the course of a bare quarter, which works out to a 200 per cent rate of return per annum. The comptroller and auditor general would have some caustic things to say about the lurid business. But ex post lamentation is just that; the minister directly involved in the deal described the CAG’s comments as idiotic. In a sense, the minister was right. What the CAG did was to shut the stable-door after the horse had bolted. Such, however, is the only function laid down for the CAG in the Constitution.

The dare-devilry with the shares of the Oil and Natural Gas Commission is of far greater import. It was crafted by the same minister who did the Centaur in. The initial hurdles were deftly negotiated, the cabinet approved, clearance was obtained from the nation’s highest judiciary, the minister had the sanction and the authority to dispose of the country’s most prized assets to foreign interests, for a song. Much care went into the planning of the operation. Only 10 per cent of the ONGC equity was, for the present, offered for sale. With due fanfare, it was described as the initial public offering. The price band per share was set at Rs 680/750, although the latent market sentiment would have justified a minimum floor price of around Rs 800. In effect, the government made a prior commitment to sell the ONGC shares at less than what the market was willing to offer; no answer was provided to why this should be so.

The drama unfolded with the opening of the market on the designated day; the ONGC shares were over-subscribed during the very first hour. By the date the offer closed, the extent of over-subscription was staggering. The authorities are yet to do the actual allotment. The story behind the dazzling market-performance has since broken. One of the leading operators in the American bourses, Warren Buffett, has quietly put out a billion dollars, roughly Rs 4,500 crore, in quest of ONGC shares. Divide Rs 4,500 crore by Rs 750 and you can easily count the number of shares — 6 crore — Buffett will be able to lay his hands on.

For the public offer will, in effect, be reduced to a private placement, and the bulk of the equity offered for sale will now become the property of the American investment tycoon. It is as if the entire deal was intended to serve his cause. Small local investors were already carefully shut out, for it was stipulated that none of them would be allowed to buy beyond Rs 50,000 or more than 10 shares.

Gift-horses need to be looked in the mouth. Take a peep at the antecedents of Warren Buffett. He is by no stretch an industrial entrepreneur. He customarily arrives on the scene only to buy up established companies with long-term prospects. But he is basically a speculator in stocks and has no intention to lock up his money. Once the behind-the-scene negotiations are through and the majority of the 10 per cent of the ONGC shares are, by rights, his, he will, at the first opportunity, sell off his holding to Exxon, Mobil, Chevron or some other American oil conglomerate. The US oil tycoon will arrive and take charge of India’s oil reserves.

The doubting Thomases may raise a query here: how could the Americans assume total control of the ONGC with at most a 10 per cent holding of the total equity? The disinvestment ministry has, however, not given any undertaking that the process of denuding the nation’s oil industry is only a one-off operation. Should the minister’s party return to power and the minister himself retain his portfolio or be promoted to be the country’s finance minister, “strategic” sales could be repeated to the extent of another lot of 10 or 15 per cent of total shares. Strategic sales may then lead to “strate- gic management” by the American majors.

Discussion of mischief such as this should have been the principal constituent of the agenda in the election debates in the current season. It has not. As long as the two principal national parties have a mutual understanding on how best to scuttle the nation’s economic sovereignty, it is unlikely that, even following the polls, the issue will come to the fore. For meanwhile, the leaders of the Congress have gone on record; their party too is all for economic reforms.

A footnote has been generously added though; of course, such reforms are to be combined with adequate care for the nation’s poor. This pious hope is as good as a non sequitur. Ever since the International Monetary Fund launched its structural adjustment programmes, with further inputs from the World Bank and the World Trade Organisation, the global experience is overwhelmingly one-sided. The economic reforms, by whatever names described, have in most cases led to the further immiserization of the countries on which the experiments have been tried. Even in the rare instances where the countries as such have not been further impoverished by the “reforms”, the poor in the countries have been crushed into progressive nothingness.

The silent acquiescence of the Congress in the ONGC sell-out is particularly galling. The establishment of the ONGC was considered by Jawaharlal Nehru as a milestone in the nation’s march to economic self-reliance; he took special pride in this achievement. It was a riposte to the American overthrow of Mossadeq in Iran. Oil was the most precious of intermediate products, and India must not fall into Anglo-American clutches in regard to its supply; the nation must begin from the beginning and, along with the take- over of distribution outlets and selling up of domestic refining capacities, develop its own oil exploration facilities and from there progress steadily but surely towards oil self-sufficiency.

The initial successes in this direction were spectacular. But the past one and a half decades tell a bleak story. The distribution system has been de-nationalized, foreign firms have been called back and exploration blocks gradually doled out to foreign companies either operating directly or under the cover of an Indian collaborator. The US conglomerates have played a waiting game. They were not prepared to enter into any profit-sharing arrangement with a public sector entity such as the ONGC. They leased in the exploration blocks, but hardly did any actual exploration.

There was a time in the past when domestically extracted crude supplied nearly one-half of the country’s total refining requirements. That proportion has now gone down to one-third or even less. The demand for oil has mounted and, along with it, the government’s philosophy has undergone a sea-change. Surrendering the nation’s oil infrastructure — built assiduously over the years with the nation’s own resources — at a throwaway price to foreigners is now taken to be a child’s pastime.

In a manner of speaking, what is happening is external assistance in the reverse. A poor nation is offering its physical assets at a highly subsidized price to foreign private parties, in order that the latter might exploit the nation to the hilt for an indefinite — perhaps infinite — period. It is part of a grand design. We do not feed our famished citizens, instead we export, via subsidy, our wheat and rice to feed American pigs. We dismantle out heavy machinery and engineering plants; instead export steel and even pig iron. We close our mines, and import coal from elsewhere. We hand over the ONGC, on a platter, to American conglomerates. The rich shall inherit the earth with some assistance from the Uncle Toms in poor lands.

It is a dirty story about how to return to colonial times.