Calcutta, Nov. 24: The government is considering a hike in the foreign investment limits of ONGC Videsh Ltd, Indian Oil Corporation (IOC) and Gail (India) Ltd to help them acquire oil properties abroad.
Sources said Oil and Natural Gas Corporation, the parent company, had earlier approached the government with the proposal of raising ONGC Videsh’s investment limit in view of the subsidiary’s aggressive bid in various proven fields abroad to acquire oil equity.
The major hurdle ONGC Videsh is facing is the narrow investment limit which often makes it difficult for the company to compete with companies from China and Malaysia.
For every single bid, the company has to approach the government for its approval, which is a time-consuming process.
“Union petroleum minister Ram Naik has also advocated the proposal as it will streamline ONGC Videsh’s decision making process for overseas investments,” they added.
The decision will also help IOC and Gail to go into upstream activities by either floating separate subsidiaries or through exploration and production divisions.
The present limit of Rs 200 crore was fixed in 1996 when the oil sector was not deregulated.
Moreover, the exchange rate was Rs 34 to a dollar seven years back, while it is now around Rs 46 to a dollar. Hence, the Rs 200-crore limit has lost significance in today’s world if the inflation rate is taken into account.
ONGC chairman Subir Raha said the company plans substantial investment abroad through ONGC Videsh in the Tenth Plan and Eleventh Plan.
“This will require an enhanced investment limit and operational autonomy for the company,” he added.