| stuck in the deep
New Delhi, Sept. 21: The privatisation of some ONGC-discovered oilfields in the mid-nineties is turning out to be a rather nasty experience for the country. Payments of around Rs 1,800 crore due from private companies have come under dispute in the eastern offshore Ravva oilfields with the government having to take recourse to expensive arbitration proceedings in London.
Videocon, owned by the Dhoots, is turning out to be the most troublesome partner in the ONGC joint venture which includes Cairn Energy of the UK and Marubeni of Japan.
Sources disclose that the government has claimed roughly Rs 800 crore from Videocon alone, while around Rs 500 crore each has to be recovered from Cairn Energy and Marubeni.
Videocon has admitted that it owes Rs 300 crore to the government. However, it has taken a peculiar stand that the production-sharing contract does not specify the exact time in which the amount has to be paid so it will pay the money when it wants to.
Senior officials point out that this is an absurd argument as the company is enjoying a regular flow of returns from the oilfield and, therefore, there has to be either a monthly or a quarterly payment schedule. As a last resort, the government has now started deducting around Rs 3 crore a month from the sale proceeds towards the Rs 300 crore dues. Since the recovery will take time and the question of the interest due on the payment will have also have to be settled, the costly arbitration cannot be avoided.
Earlier the arbitration proceedings had to be held in Kuala Lumpur but due to the SARS scare it was shifted to London.
The dispute over the remaining Rs 1,500 crore is the subject of another arbitration proceeding. Cairn and Marubeni have taken the stand that the share of the profit due to the government has to be calculated on the post-tax profit of each individual partner in the consortium.
Since the foreign companies have had to pay a higher corporate tax their net profit from the venture is lower and hence the share to be paid to the government has also got to be lower.
However, the government’s stand is that the Ravva oilfields are being operated as a single venture by a consortium and hence the average rate of corporate tax paid by the foreign and Indian companies forms the basis of calculating the net profit for paying the government’s share.
Sources say the problem has arisen because the production-sharing contract was hastily drawn up during Satish Sharma’s (Congress) controversial tenure as petroleum minister. The foreign companies have reaped rich profits from these oilfields which had already been discovered by ONGC.
Videocon had also triggered a major controversy by taking a huge loan against the reserves of the Ravva oilfields. The government had even issued a notice threatening to throw the company out of the joint venture but it had managed to wriggle out.
In the Mukta-Panna oilfields and Tapti gasfields, Enron had taken the government for a ride by padding costs. The US company had eventually made a killing by selling off its stake for $350 million while it had bought it for less than $20 million.