Economic
Highlights
New Delhi, 29 April 2019
Oil, PSUs Death &
Jobs
FOLLY, ACCIDENT OR
CONSPIRACY?
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
(Copyright,
India News & Feature Alliance)
New Delhi
27 April 2019
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