ONGC’s proposed unrelated diversification plans
It is reported that ONGC is looking for joint venture partners to set up 6000 MW of solar and wind energy projects It is said that the joint venture would invest Rs.3750 crores and would target to set up atleast 2000 MW of capacity by 2020. In this, 1500 MW would be wind power while 500 MW would be solar power capacity.
Unmet targets of ONGC
ONGC, a Government of India undertaking, has the task of working on gas exploration projects and increase the domestic production of natural gas.ONGC has huge task before it, as India is highly deficient in natural gas production. Present import of natural gas in the country is around 13 billion cubic metre which is likely to go up substantially, if adequate gas exploration efforts would not be stepped up to increase the production of natural gas in India.
ONGC has still a long way to go to achieve its objectives and meet the needs and expectations of the country. It’s gas exploration efforts have to be increased to a very great extent.
A June 2013 report by Barclays Equity Research notes that ONGC has missed production targets for the last five years due to endemic project delays with its 40 large projects costing $14 billion running 22 months late on an average. The report adds that. further delays are expected; for example, the 13 projects that ONGC expects to come on stream by end FY14.
Will ONGC bite more than what it can chew?
Under such circumstances, it is not clear as to why ONGC want to diversify in setting up solar and wind power projects. While, no doubt, solar and wind power projects are of vital national importance, the question is whether ONGC should get into such areas, in which it has no particular specialization, particularly when its main task of stepping up natural gas production itself remains considerably incomplete.
While there is no logic for indulging in such unrelated activities, ONGC will bite more than what it can chew by taking up such projects and divert its management time and attention.
Coal India’s unrelated ambition
A few weeks back, we heard about Coal India , which is involved in mining of coal, planning to enter into business of fertilizers and chemicals using coal gas. Similar to ONGC, Coal India is also planning for unrelated diversification, while its objectives of stepping up production of coal in the country remains considerably unfulfilled causing huge import of coal, inspite of the availability of large reserves of coal in the country.
India imported over 80 million metric tonne of coal last fiscal. Nearly 50 million metric tonne of the imports went to meet shortfall in supplies from state run monopoly Coal India, which produced less than the target.
Need for focus on core areas of activities
Diversification of activities by large public sector companies involved in vital fields should be stopped forthwith and they should be told firmly by Government of India to focus on core areas of activities for which they have been set up.
Government of India should immediately ask ONGC and Coal India not to venture into new and uncharted areas, which would make them pay divided attention to the much needed efforts in the core areas of their functions.