Gujarat State Petroleum Corporation: A familiar tale of arrogance
On June 26, 2005, Mr Narendra Modi (the then-Chief Minister of Gujarat) announced that Gujarat State Petroleum Corporation (GSPC) had discovered India’s largest gas reserves in the Krishna Godavari (KG) river basin. He declared as fact that the discovery of 20 trillion cubic feet was worth Rs 2,20,000 crore and would serve to make India energy-independent.
Fast forward thirteen years, and like most of Mr Modi’s promises it has turned out to be a “jumla”, an empty promise.
Except this piece of propaganda cost the nation thousands of crores in taxpayer money — and promises to cost even more if Mr Modi has his way.
The GSPC issue can be distilled into a single sentence. An over-exuberant GSPC stretched itself thin chasing after these illusory oil reserves in the KG Basin that never materialised, it spent vast sums of public money (close to Rs 20,000 crores) to do so, acquired unnecessary assets in parallel and now is sought to be bailed out using taxpayer money.
***
Over the years, the GSPC saga has continued to wreak immense financial havoc on the state of Gujarat as attested to by the Comptroller and Auditor General (CAG) of India in not one but two reports — March 31, 2015 and March 31, 2016. These reports also revealed how lucrative drilling contracts were awarded to companies that had no expertise whatsoever — whose sole qualification was their alleged proximity to the ruling establishment of today.
In the first week of September this year, the ONGC Employees Mazdoor Union wrote to the Prime Minister. In a particularly damning observation, they stated as follows:
“… Even after GSPC spent large sums of money, hired foreign experts and imported sophisticated equipment, they could not find gas, why was ONGC asked to pay Rs 8,000 Crore to acquire the block? It is a clear case that ONGC had been brought in to bail out GSPC for the misdemeanours on the part of the officials responsible for the same. This badly affected the cash reserves of a cash rich company like ONGC…”
This is an apt summary of the apparently criminal mismanagement that has plagued the GSPC, all fed by the hubris of the then Gujarat Chief Minister. This tale of mismanagement now threatens to infect national institutions such as the ONGC.
***
Over two years ago, I started writing about the need for a judicial enquiry into the affairs of the Gujarat State Petroleum Corporation and its then-ongoing exploits in the Krishna Godavari Basin. The GSPC was piling up massive debt; it had borrowed almost twenty thousand crores from public sector banks and had only produced a report to show for its efforts.
It was becoming clear that the much advertised reserves in the KG Basin were not going to materialise. We were aware on the basis of documents available in the public domain, that the GCPC exercise in the KG Basin needed investigation — certainly not, a bailout.
The GSPC’s own documents and reports (such as the Development Plan in 2009 and the “New Domestic Natural Gas Pricing Guidelines 2014”) attested to the fact that the project was unviable. Furthermore, the CAG had repeatedly made scathing observations about the loans taken from public sector banks and the complete disarray that was prevailing at GSPC.
Fiscal acrobatics aside, it is becoming increasingly clear that there are some questions that Mr Modi cannot evade.
First, why is the ONGC reportedly paying over Rs 8,366 crores for an asset that has, by all accounts, yielded a paltry 73 crores till date? The valuation of the asset comes out to over a hundred times of the so called revenue generated.
Second, when 72 per cent of the asset has been relinquished by the GSPC and its consortium partners, why is the ONGC paying a king's ransom for the remaining 28 per cent of an asset which has never yielded any significant findings?
Third, GSPC in its own annual reports has attributed a significant loss of Rs 14,923 crores to its KG Block assets. The said KG Block Assets have actually been regarded as impaired assets in the books of GSPC itself.
In light of the above, no responsible individual would recommend the purchase of such a significantly distressed “asset”. Unless the objective was to conceal serious errors of judgment made to back up the whims of the head of the state government at the time.
It is a tale that has become all too familiar:
Mr Modi has a tendency to make tall claims, to over-promise and severely under-deliver. But given the investment in terms of time and money, mismanagement at this scale demands answers. Mr Modi can structure this however he likes, but the truth is that with every passing day, it is clear that the GSPC episode marks one of the most striking controversies ever witnessed in his tenure. An unwilling ONGC — a Navaratna company — has been forced to bail GSPC out and whitewash its sins of omission and commission.
Over a span of 13 years, apparently outlandish claims made by GSPC and Mr Modi have come to naught. Despite the CAG’s scathing findings, the ONGC Employees Mazdoor Sabha’s genuine concerns and those raised by other Parliamentarians including myself, the apparent mismanagement continues with impunity.
It is clear that only a thorough judicial enquiry can reveal the extent of the rot that plagues the GSPC.
The ONGC would be well advised to listen to its long serving employees and refrain from the purchase of this asset.
Otherwise, it would risk becoming complicit in a conspiracy that is destined to be exposed.
No matter how hard those in power wish to suppress it