Dud projects to be buried in VSNL portfolio shakeu
Govt prods oil firms to forge overseas deals
Chattisgarh wades into Balco selloff

New Delhi, Feb. 18: 
Videsh Sanchar Nigam (VSNL) will sew up a tighter telecom portfolio and may do away with some of its excess baggage. The projects likely to be shelved include its cellular venture and its proposed participation in Project Oxygen Network.

The company is in the process of creating a compact portfolio, with a slew of services to be rolled out in a phased manner. Recently, the VSNL board agreed to either defer or shelve those projects whose viability has been questioned and credit ratings downgraded by international agencies.

�It is important that we focus on businesses which increase profit. We do not wish to carry baggage which will become a liability and make the company sick,� a VSNL director said.

As a result, the state-owned international telecom carrier is likely to shelve its cellular venture and will focus on entering the basic fixed telephony and direct-to-home services. Recently, chairman S. K. Gupta had hinted that VSNL might shelve the cellular venture. �With the government permitting fixed line operators to provide limited mobility, we have decided to re-consider our entry into cellular business,� he said.

While the company has filed applications to become a fixed line service provider in Delhi, Maharashtra and a few southern states, it is not keen on cellular services. It has also shelved the company � Videsh Sanchar Service (VSSL) � created to offer cellular services and other value-added features.

Meanwhile VSNL�s decision to disassociate from Project Oxygen was discussed at the board meeting. �Our participation in Project Oxygen may not be pursued further, since there have been some disturbing reports about the project. It is unlikely that we will participate further unless we get assurances from the promoters. We have other commitments. There was no equity participation in the MoU and it was limited to laying down infrastructure and dealing with policy issues,� sources in VSNL said.

VSNL had signed a memorandum of understanding in July 1998 with Project Oxygen, the company that will build and operate Project Oxygen Network. The agreement enabled it to buy capacity on the network, a global undersea optical fibre cable system. POL, the Bermuda-based fibre optic network major, was in negotiations with several other internet service providers to fund the $ 100-million first phase of international data transmission project.

The international fibre optic network of Project Oxygen would have entered India at Vishakhapatnam and run across to Mumbai and Bangalore, besides several other Indian cities.

The company had plans to sell connectivity in 40-50 cities from its cable landing station in Vishakhapatnam. However, the project was held up due to lack of funds from international agencies.

�We are not confident about the project. We do not want it to land us in an Iridium-like predicament. We had invested close to Rs 53 crore in the project. More important, though there was no equity involved, we had made major investments in setting up the gateway and other infrastructure.�

Project Oxygen is a part of the $ 4.3-billion global project, which proposes to connect 24 countries covering 1.05 lakh kilometres by July 2002.


New Delhi, Feb. 18: 
Backed by comfortable forex exchange reserves, the government is encouraging state-owned oil companies to pick up equity in oil-fields abroad, similar to the one signed recently with Russia.

The Russian deal was a sort of coup in which British Petroleum was edged out by ONGC Videsh. The Russians are more comfortable working with Indians. Although, the management of the state-owned Rosneft at one stage preferred BP to ONGC Videsh.

The deal was struck only after India agreed to meet the entire development cost of the oilfield, Sakhlin-1. The development cost has been estimated at around $ 1.4 billion.

Though the Indian company has only 20 per cent equity in the field, it will be meeting 50 per cent of the development cost after investing $ 300 million as equity plus signature bonus. The Russian company will repay its portion of the development cost in kind through its share of oil, with an interest at the rate of LIBOR plus 300 basis points.

This is the first major foreign investment by an Indian company. It could be attributed to the country�s new-found confidence in its balance of payment position.

The search for equity oil began more than a decade ago. However, as ONGC Videsh is a public sector company, it could not compete with oil majors whose enormous resources could influence decision makers. The political leaders of Russia had other considerations, as well, in favouring ONGC Videsh.

The government�s assessment is that oil-rich CIS countries could be persuaded to enter into similar production sharing deals. These countries may also ask for loans to meet the development cost of oilfields.

Indian Oil Corporation (IOC) is in a hurry to become an integrated oil company. It has no expertise in upstream operations. Its request for participation in Sakhlin oilfield was turned down by ONGC.

However, ONGC Videsh is tantalising it with offer of a stake in the proposed joint venture in Algeria. India did not have much interaction at the political level with Algeria till recently. It was the deal with Iraq which brought ONGC Videsh close to Algeria. Sonatrach, the state-owned oil company in Algeria, will be a partner in the oilfield to be developed along with Reliance Industries.

Algeria�s offer of a stake for ONGC Videsh in the proven oilfield at Block II-42 is considered a goodwill gesture. This could bring the gas-rich Algeria close to India.

Algeria plans to become a major liquid natural gas (LNG) player and India could be a market for it. It is also keen to sell crude to IOC.


New Delhi, Feb. 18: 
A proposal by the Congress-ruled state of Chattisgarh to buy the selloff-bound Bharat Aluminium Company (Balco) has caught the government in a cleft.

State industry minister Mahendra Karma wrote to disinvestment minister Arun Shourie on February 12, saying his state can rival the bids of private firms keen to snap up the highly profitable company in the newly formed state. Hindalco and Sterlite are the two private contenders in the fray.

Karma insists that Chattisgarh can offer more than the Rs 400 crore that private companies are believed to have thought of. According to a plan presented by him, the state will pick up 40 per cent in Balco, 20 per cent will be offloaded to employees and the rest sold to financial institutions.

Chattisgarh argues that the PSU in which the government wants to dilute its holding is worth more, and if a good price is all that the Centre wants, it is willing to cough up the money and run the company. Disinvestment ministry officials dismiss the contention, saying no valution of the alumium major has been made so far. However, their own estimate is that the sale of shares � with a face value of Rs 249.31 crore � can fetch the government Rs 600-800 crore.

Disinvestment ministry officials perceive Chattisgarh�s buyout proposal � a wildcard entry in the Balco selloff race � as a political ploy by the Congress to embarasss the BJP over its disinvestment policy. �It�s one of the few bluechip companies in the state. They want to make a show of just how much they care for it,� a senior ministry official said.

The Centre wants to sell 51 per cent to a strategic partner, and retain the rest. If the deal offered by Chattisgarh is accepted, it will amount to an outright sale � to a state government.

The ministry cannot brush away the offer without giving it a patient consideration. Doing so will leave it vulnerable to attacks by the state government and the Congress party in Parliament.

Earlier, Mamata Banerjee, leader of Trinamool Congress, a party which is part of the NDA government, had opposed the selloff in Balco. The railway minister argued that the transfer of majority control in a company which makes casings for rocket and ballistic missiles, besides accessories used in space exploration, will not be in the national interest. Also, there is fear that it might lead to a monopoly if the Balco shares are sold to another aluminium major.


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