ONGC has tremendous potential to serve the nation and reward its shareholders, both in dividends and value appreciation
Recently, it may be recalled that when the government wanted to divest from Coal India Ltd by a buy-back arrangement, there was a huge public outcry, essentially from its employees, who threatened to go on a strike. At this point of time, the government was desperate to get enough cash to cover the current account deficit. Ultimately, they planned and executed a simpler method of getting the required cash, by ensuring Coal India paid out a large dividend. Which they did, by giving away Rs29 as interim dividend on a share with a face value of Rs10!
In fact, dividends from Coal India amounted to Rs5,695 crore in 2011-12, which moved higher to Rs7,959 crore in 2012-13 and to Rs16,486 crore in 2013-14!
ONGC, however, did not fall in the same league as Coal India, in terms of total pay-out. It remained almost steady at Rs5,775 crore in 2011-12 and moved on to Rs5,627 crore in 2012-13 and has, in fact, declined to Rs2,961 crore in 2013-14. The final dividend for 2013-14 is likely to be announced a few months from now. All these because, in the case of ONGC, the operations are very different from mining for coal, as, many times, a prospective well that may initially show signs of being a potential supplier may turn out to be a non-viable proposition. Actuals vary, but a ball-park estimate of $200 million to drill exploratory wells will not be off the mark!
In a strategic move, ONGC Videsh Ltd, the overseas arm of ONGC paid
$561 million (Rs3,470 crore) for a 12% stake in Brazil, taking their holdings to 27% while Royal Dutch Shell held 73% in the deep water offshore block
BC-10 located in Campos basin. Work is progressing, satisfactorily so far.
Back in India, ONGC, continues its investigations to obtain coal bed methane in Jharkhand and West Bengal. It has resumed drilling in West Bengal and out of 11 wells, five have been taken in partnership with Oil India (which has 25% stake).
In the KG basin, ONGC has plans to spend some $9 billion by 2017-18. However, this area has recently become problematic, in as much as 11 of its oil and gas discoveries sit close to Reliance Industries Ltd (RIL)'s KG-D-6 block and Gujarat State Petroleum's Deen Dayan gas fields. This block is divided into a Northern Discovery Area (NDA) and a Southern Discovery Area (SDA), and, according to NK Verma, director - technical (exploration) of ONGC, they are looking at the possibility of producing 2.5 to 3 million tonnes of oil per annum and 9 to 10 cubic metres of gas per day. Present estimates are 92.30 million tonnes of oil and 97.568 billion cubic metres of in-place gas reserves spread over seven fields
ONGC was lucky enough to have bought 90% interest in block KG-DWN-98/2 from Cairn in 2005 and it still holds the balance of 10%.
In the recent past, ONGC officials felt that reservoir continuity could be one reason why RIL may be actually drawing up from their pool. Since this sort of mix-up can occur when blocks are located close to each other, and actual reservoirs are miles below the earth. In order to resolve this issue, technical teams from Reliance and ONGC are working to find out if there is actually a connectivity of the reservoir in the east coast gas producing block. If there is no consensus, an independent expert will have to be appointed to examine the data, which may eventually lead to prorata allocation of volume, once the connectivity of the reservoir is established.
RIL and ONGC have inked a memorandum of understanding (MOU) on this to settle the issue.
In the long run, it is imperative that a Regulator is appointed to deal with such matters as this will be binding on all parties concerned, considering the fact that so many areas will be offered for exploration in due course, with NELP X around the corner.
Apart from its overseas aspirations, ONGC has been successful in striking gas in Madhya Pradesh in Nohta, in Damoh district, in 2012. In fact, in course of the next two years, ONGC has reported discovering gas in all four wells in Damoh, Jabera-Katni near Jabalpur. Since the discovery is considered significant, according to Mr Verma, Director Technical, the company plans to drill five more appraiser wells in the block to assess the potential. Initial test reports indicate that the hydrocarbon resources have been found to be concealed under nearly 2 km thick hard rock cover, involving challenging work where extraction may not be easy. Yet, the engineers are working on this difficult terrain.
In the meantime, it is gratifying to note that ONGC has signed a pact with Mitsui of Japan for oil and gas exploration in India and 3rd countries. This agreement would pave way for opportunities such as setting up a regasification terminal at Mangalore or any other mutually identified locations, including marketing of regasified LNG.
So, in the long run, ONGC has tremendous potential to serve the nation and reward its shareholders, both in dividends and value appreciation.
(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 US.)
Can all direct taxes be abolished in favour of a transaction tax? Seems like a pipe dream
Vindicating the stand taken by Moneylife Foundation, the ministry of corporate affairs has warned people against celebrity endorsements and misleading claims in financial products
The Ministry of Corporate Affairs (MCA) has vindicated the stand taken by Moneylife Foundation against celebrity endorsement and misleading claims made in advertisements related with financial products. Through an advertisement aired on radio, the MCA is urging consumers not to believe in celebrity endorsements. It also advises companies not to waste money based on celebrity endorsements and advertisements.
Four years ago, Moneylife Foundation had petitioned against celebrities endorsing financial products because they were complex and not like colas or consumer product.
An official from the MCA told the Economic Times that “The advertisement is part of a larger campaign to educate investors. It is not just celebrity endorsements that we are targeting. The ministry is likely to do more such advertisements through the year so that investors don't get swayed by misleading TV commercials.”
The MCA advertisement, which airs on All India Radio (AIR) FM channel, is conversation between friends. It explains that, how a company that is spending a lot of investors’ money on endorsements that cannot give higher returns and one should be careful before investing in such company.
Monylife Foundation Trustee Sucheta Dalal, while talking at interactive session on how to hold irresponsible advertisers accountable, emphasised that there is a need for a common code that brings banks and insurance companies on par with mutual funds. “While toxic insurance products were sold to the gullible investors nothing is being done to stop false advertisements. Since the banking regulator has no rule on misleading advertisements, banks too can get away by mis-leading consumers by showing a higher return,” she said.
The Securities & Exchange Board of India (SEBI) is the only regulator to fix the problem of mis-selling of mutual funds. However, Insurance Regulatory and Development Authority (IRDA) and Reserve Bank of India (RBI) are still asleep on celebrity endorsement of financial products. SEBI said, mis-selling is not restricted to false statements, but can also happen by ‘concealing or omitting material facts’ or ‘concealing associated risks’ and not taking care to ensure ‘suitability of the scheme to the buyer’.
SEBI has stringent rules for initial public offering (IPO) ads as well as mutual funds. As we all hear, "Mutual fund investments are subject to market risks, read the offer document carefully before investing”. SEBI had asked the advertised to slow down its speed from the fast one. It also mandated companies to use fixed and readable size for fonts used in disclaimers. SEBI insist that the disclaimer should be displayed for minimum six seconds and must be coherent and comprehensible as per its regulation.
Celebrity endorsing shampoo and soaps is far different than celebrity endorsing mutual fund or any financial products. Especially when the celebrity is not fully aware of the financial product he/she is endorsing and makes tall claims about it. We come across many advertisements including Amitabh Bachchan, Irfan Khan and Sachin Tendulker selling insurance policy and child plans.
All advertisements were so appealing and made financial products seem simple, safe & so- easy to buy, but the reality is far different than what they show. The celebrity Actor Irfan Khan saying ‘Kum Inusrance lene ki bimari’ while endorsing Aegon Religare Insurance is the same company having maximum rejection of claims. Moneylife Earlier wrote about, Aegon Religare: ‘Kum’ insurance ‘dene ki bimari’.
The 71-year-old Bollywood mega star, Amitabh Bachchan in one famous commercial advertisement claims buying an insurance policy is two minutes task like cooking two minute noodle, which is also endorsed by him. However, as we all know the reality is buying Insurance policy requires a lot of time and in-depth research.
Recently, the super star said that “his conscience had made him stop endorsing Pepsi after a school girl in Jaipur asked him why he promoted the soft drink that her teacher branded as poison.”
He stated this while addressing an interactive session on celebrity endorsements at the Indian Institute of Management, Ahmedabad (IIM-A) according to the report.
Last week, The Central Consumer Protection Council (CCPC) under the chairmanship of minister, KV Thomas set up a sub-committee to draft guidelines to safeguard consumer interest from false advertisements in the country. According to reports from Times of India, The panel discussed the tall claims made by advertisers and the need for celebrities endorsing products to be liable for misleading advertisements.
As per The Companies Act, 2013, “Any person who makes a promise or forecast that is false shall be punishable with jail of six months, extending up to 10 years.” While earlier under the Companies Act, 1956, punishment for such an offence was limited to a fine.
However, to punish a celebrity endorser, it has to be proved that whether celebrity person made the representation "recklessly", without ascertaining the facts, or he was aware that the statement was false or misleading.
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