Huge tasks await for Dharmendra Pradhan, the new oil minister

No doubt, Dharmendra Pradhan would do all that it takes to ensure work goes on smoothly, and clears approaching hurdles.

The new minister, Dharmendra Pradhan, has a lot on his plate that the former UPA minister Moily left for him to handle.  It may be recalled that the major issue that needs immediate attention is the fixation of the gas price for Reliance, which ought to have been effective from 1st April, but could not be introduced due to the elections.  Now the ball is in Pradhan's court. No doubt, this pending issue may have to be discussed by the Cabinet before being made public.

Will the new government honour the commitment made by the previous administration, at least for the time being before finalising the issue? At the same time, they have to consider the policy of pricing the domestic gas produced, including whether the rate should be on a US dollar base, and if so, at what rate of rupee conversion. This gas price, when announced will be applicable to all gas produced in the country. The Minister will also have to tackle the issues relating to retail price of auto fuels
 and capping of LPG subsidy.

In his meeting, Pradhan is reported to have stated that self-reliance was important for the country to become an economic "super-power". For the time being, and for years to come, this self-reliance depends upon how Reliance increases its gas production and finds new fields to ensure greater supply of both gas and oil to the country!

Pradhan has also stated that the focus of the Modi government will be eradicating poverty.  At the moment, there is poverty of power to deal with too!

According to the press reports, Pradhan apparently has been adviced by his ministry officials on matters relating to "decisions" that "should not" have been taken on subsidising domestic LPG cylinders etc. There is a lot of focus on ONGC which is a government enterprise directly involved in the matters which are primary concerns of this ministry.

First is the good news that ONGC has been exploring the Krishna-Godavari block (KG-DWN-98/2), primarily classified as a "gas field", and have luckily "discovered" huge reserves of oil, initially estimated to hold 100 million tonnes, according to Narendra Kumar Verma, Director, Exploration. While further exploration and investigation work is going on at the site, plans are on the anvil for ONGC to start producing oil from this field by 2017-18. No doubt, Dharmendra Pradhan would do all that it takes to ensure work goes on smoothly, and without interruption of any kind, to get the oil to really gush out earlier than 2017-18, if practical.

The second major job on hand for ONGC, is the exploratory drilling in the Palar basin, which is some 40 kms North of Chennai, and which falls between two existing prolific producing Cauvery and Krishna-Godavari basins.  According to Verma, it will take about four months to drill its way to reach 2,000 metre depth.  Due to strong cash reserves and focus on exploration policy, ONGC is already in the process of upgrading their hardware, including rigs, floaters etc.  It appears that new generation rigs with joysticks are being extensively used in the US, as these can drill upto 4,000 metres in three weeks, and can be assembled or dismantled in a day.

So, as soon as possible, it would worthwhile for ONGC to obtain a few of these so that they can carry out several drilling operations in prospective sites in various blocks under their control.  Past experience with exploration shows that when such exploratory drills are undertaken, only one out of ten becomes successful, and even then, the yield may not be significant. It may be mentioned that in the nine rounds of auctions, 302 blocks have been given out, where 123 "discoveries" were made, but only six have begun to produce anything of importance.

Another important issue that Minister Pradhan will have to study carefully.  And this relates to the 84-page report from the Comptroller and Auditor General, who has slammed both the Oil Ministry and Director General of Hydrocarbons for "failing to check" and for "losing control" over Reliance Industries on its spending which impacts the government revenue in KG-D6 fields.  

It may be noted that the present oil field contracts permit companies to recover their investments in a "graded" manner before sharing revenue with the Government.  Any "unjustified" or "excess" amount spent without "due  approval" may adversely impact the government's stake.  Minister Pradhan will no doubt need good advice on this score to handle present and future contracts.

One other issue that the Minister may need to look into relates to the present manpower, both technical and otherwise, in the Ministry and DGH.  Whether one likes it or not, some dead wood and paper pushers may have to be removed and replaced by qualified technocrats.

It may also be necessary, and perhaps prudent, for the Minister to see if ONGC itself needs any reorganisation, and whether they can be burdened with 40% share of losses of state run fuel retailers who incur these in selling diesel, cooking gas and kerosene below the cost of actual production. It is a difficult decision to make, but to what extent can they continue to "sell" below the actual production cost?

As if these issues are not enough for a single plate, Minister Pradhan has the following pending issues to tackle, as soon as possible:

a) Gujarat State Petroleum  has been waiting for an environmental clearance to lay a 11.5 Kilometre pipe line; work has been suffering for months now;

b) Cairn India had sought for reinstatement of surrendered fields and the Oil Ministry had indicated that they may have to again make a bid to get the block. There is no reason for such an approach      and an explorer like Cairn, with a proven track record, need not be put through such an unreasonable demand.

c)  Gas prices which were gazetted on 17th January, but withheld due to the elections; can be set right now;

d)  Urea manufacturers have been unable to get the gas they need due to fall in production from Reliance; The Ministry must either make the gas available through other sources but ensure production does not suffer. However, as gas supplies are low at the moment, and not sufficient to meet domestic needs, overseas projects to be set up by the government with main gas exporters like Qatar.

A full plate awaits action from Minister Pradhan.

(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the




2 years ago

There is no issue of capping the LPG cylinder numbers. It should be 12 per year. Because, it is the source for LIG/MIG people. Govt. should make LPG for commercial purpose with differently coloured cylinders and fix price accordingly.

Italian CRIF buys majority stake in High Mark credit bureau

Following RBI directive last year, Italian CRIF has taken over cash-strapped High Mark Credit Information Services for an undisclosed sum

As pointed out by Moneylife in November 2013,  Italy-based CRIF SpA has acquired majority stake in cash-strapped High Mark Credit Information Services Pvt Ltd (High Mark). No financial details were provided. However, as reported by Moneylife, in December 2012 High Mark was offered Rs30 per share by CRIF.

"Larry Howell is the chairman of the newly constituted board and Kalpana Pandey continues to be the chief executive (CEO) and managing director. High Mark's current management and staff will be retained to carry on its current business operations," the Indian credit bureau said in a release.

In his previous innings, Howell successfully brought together TransUnion, which he was heading at that time, and CIBIL, India's first credit bureau.

Last year, the Reserve Bank of India (RBI) increased foreign direct investment (FDI)  limit to 74% in credit information bureaus in the country. Moneylife had pointed out that this move would prove to be beneficial to Italian CRIF SpA to enter Indian market and also take over cash-strapped High Mark.

As reported by Moneylife earlier, High Mark was negotiating with CRIF credit bureau for a bailout. High Mark was offered Rs30 per share by CRIF, which is also an existing shareholder in the credit bureau. CRIF SpA owns 9.09% stake in High Mark. We learned that CRIF executives had already met senior executives of RBI to assure them of support and continuity after takeover. However, the banking regulator, because of its reservations about CRIF’s ownership pattern, rejected the proposal.

Experian India, one of the four credit information companies (CICs) in India, was in talks with High Mark and reportedly had also completed the due diligence process. According to the sources, Experian had increased its bid to Rs27 from Rs25 to buy minimum 26% stake in troubled and cash-strapped High Mark. Reportedly, there is not much progress on this front as well.

High Mark was negotiating with other credit bureaus to do an asset sale, including 250 million records collected from member institutions, says a complaint filed by a former employee of the credit bureau to the finance minister, the then RBI governor D Subbarao, secretaries from the finance ministry and financial services.

High Mark, the only bureau started by individuals, has been under severe financial stress following the exit of several of its top managers and the failure of its rights issue.


Shekhar Gupta quits Indian Express

Indian Express' editor-in-chief Shekhar Gupta has resigned from the newspaper

Shekhar Gupta, the editor-in-chief of the India Express, on Monday resigned from his post after spending almost 25 years with the newspaper.


In a letter to his colleagues, Gupta said, "It is time for me to say goodbyes at the Express -- for the second time. The first was exactly at the same time of the year in 1983 when most of you were not born yet. In any case, I am an incorrigible reporter and thereby a terminal adventure junkie. By the way, even at the risk of being charged with crass tribalism, I shall write something more specifically for my fellow reporters at the Express. But a bit later."


Gupta said he would be there in the office till 15th June.


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