When ONGC, India’s biggest oil company, came out with its Initial Public Offering (IPO) in March 2004 and collected Rs 10,000 crore, the company had planned aggressive investment of Rs30,000 crore. In published reports and in a preparatory press conference seven months before ONGC’s IPO in March 2004, the director (exploration) of ONGC also promised massive increase in production. ONGC director (exploration) YB Sinha had said the firm’s current crude oil production of 26MT could go up to 49MT by 2011-12 and up to 62MT by 2016-17. Similarly, he had said that gas production could almost double from the present 65 million standard cubic metres per day over that period.
Unfortunately, this turned out to be a mere promise. Production has not increased substantially during the past five years. In fact, the production during the past three decades has been stuck in the range of 25MT-31MT, far from hitting 49MT as ONGC had promised before the IPO. ONGC’s annual report of 2008-09 says that crude oil production is likely to go up to 29MT by 2012-13 from the current production level of 25.4MT (2008-09). Industry analysts say that ONGC has drilled hundreds of wells during the past five years but could not raise its annual output. Meanwhile, the company has spent heavily on investment on new discoveries. Now ONGC is again planning another huge expenditure and needs large funding for this expansion.
The Indian corporate sector was in the habit of promising huge growth in sales and profits before making an IPO. The Securities and Exchange Board of India put an end to this practice so that investors are not misled. But a large public sector company has turned out to be equally guilty of promising but not delivering. .”-Dhruv Rathi[email protected]