Numbers show ONGC, OILnot performing: Dharmendra Pradhan

Written by Siddhartha P Saikia | New Delhi | Updated: Jul 7 2014, 16:52pm hrs
Dharmendra Pradhan, 45, a native of Odisha and a Rajya Sabha member from Bihar, took over as the minister of state (independent charge) in the ministry of petroleum and natural gas when it was facing the debate over gas pricing, arbitration between the ministry and oil and gas contractors, alleged policy paralysis, drying up of investments and continuously dipping domestic oil and gas output leading to more imports. Pradhan, who is putting in place a strategy to ramp up oil output through a vibrant investment regime, is of the view that any domestically-produced commodity cannot be sold at international prices. In a free-wheeling interview with FE's Siddhartha P Saikia, Pradhan outlines his plans as minister. Excerpts:

From day one, your priority has been to increase domestic output of oil and gas. How would you plan to go ahead

Primarily, there are three areas that have to be looked at. First, some internal reforms are necessary to remove bottlenecks. Second, technology has to be tied up to develop small and marginal fields across different sedimentary basins. And the third is about skillful management with proper accountability. This would help the domestic production of oil and gas to increase.

When you say internal reforms, do you mean empowering oil regulator Directorate General of Hydrocarbons (DGH), time-bound clearance of issues and reforms in the production sharing contracts (PSC)

Yes, empowering DGH and reforms are included when we talk about making internal reforms. The administrative process needs to be fast tracked. What was the problem with the UPA government There was a policy paralysis. There was a sense of lethargy across all departments. Now, this would not happen and there would be accountability.

Gas pricing has been a matter of debate. Do you agree with the concept that domestic gas prices should be linked with international benchmarks

It is important to have a policy regime that ensures remunerative price to gas producers. But, tell me about a single product that is produced domestically but sold at international prices. Also, give me an example of any country which implements a mechanism where any indigenously-produced item is sold at international prices. I would like to know if such a system exists anywhere. Both domestic and imported gas have their own markets and business models. It is important to have a business-friendly policy for investments, but that doesn't mean that a domestically-produced product is sold at a much higher rate than warranted. This is not only for gas but for all commodities. We need to take care of end-users. That is why we offer subsidies. Can we sell oil and gas produced from fields in Assam at the same rate as production from Mumbai High We must keep in mind the status of poorer states. To benefit a few, we cannot burden the entire population.

The exploration and production (E&P) business has a long gestation period. Do you expect output to be ramped up so fast

Yes, production would increase. But, what could not be done in the past 20 years, you cannot expect the new government to do in 20 days. We need to take a holistic view and understand the business. The economy was opened up in 1990s, but the investment that should have been made in the E&P sector did not happen. We need to scrutinise why it did not happen and remove the bottlenecks.

Earlier, you had said that auctioning of new oil and gas blocks would happen only after changes in the PSC are made. What is

the plan

Desirable investments would not come if we go ahead without a vibrant and business-friendly policy in place. Oil and gas is a fast-emerging business. The gas market is evolving rapidly. Indian agencies should meet global standards. There are several statutory and non-statutory bodies such as DGH and OISD. All these agencies must perform. We would first decide and put in place an investment-friendly regime and then auction oil and gas blocks. This would attract investments to boost output.

Do you agree that PSU players such as ONGC and OIL are not performing

Yes, that is evident. This (lack of performance) is shown by their numbers. These companies are not meeting any monthly, quarterly or annual target as set in the memorandum of understanding (MoU).

What is the reason

There was no accountability in the UPA regime. Performance of companies such as ONGC and OIL is declining because of leadership issues, accountability and defectiveness within the government. Now, we will correct it by taking strong measures.

Do you think the diversification of ONGC and OIL into non-core businesses is a reason for the decline in their performance

The government had set up every public sector enterprise with a clear mandate to focus on their respective core sector. And this needs to be followed. However, there is competition for which diversification is necessary. That doesn't mean diversification from the core business. The core area must be the heart of the organisation driving its performance.

Are you going to soon start direct transfer of subsidies for petroleum products

Yes, I am in favour of direct transfer of subsidies. The idea is to roll out targeted subsidy.