When will Pranab stop the loot of oil companies?

By R Jagannathan

It is perhaps fitting that on the eve of the third anniversary of UPA-2, the finance ministry should indulge in yet another act of looting taxpayers and investors for political expediency.

Last week, the finance ministry generously agreed to give the oil marketing companies (OMCs) - Indian Oil, Hindustan Petroleum and Bharat Petroleum - a last instalment of Rs 38,500 crore as subsidies for selling diesel, cooking gas and kerosene far below cost in 2011-12, making for a yearly total of Rs 83,500 crore.

So far, it seems, only the aam taxpayer has been mulcted in the name of sparing the aam aadmi from the adverse effects of global oil price spikes.

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[caption id=“attachment_317358” align=“alignleft” width=“380” caption=“The government has been robbing the upstream companies to pay downstream marketers so that pet political constituencies can be protected. Reuters”] [/caption]

But the aam investor is affected, too. Since the taxpayer-financed subsidy was simply not enough to cover the OMCs’ losses of Rs 1,38,500 crore, Pranab_da_ asked ONGC, Gail and Oil India - also called the upstream companies - to chip in with an additional Rs 55,000 crore as subsidy.

Nothing unusual in this - for the government has been robbing the upstream companies to pay downstream marketers so that pet political constituencies can be protected till they come out to vote in the next elections - but the devil was in the detail.

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In yet another act of perfidy, the finance ministry quietly pushed up the upstream companies’ share of the subsidy to nearly 40 percent of the OMCs losses. Last year it was 36.75 percent. The year before it was about 33.3 percent. In 2011-12, it was raised to 39.7 percent.

Sorry, ONGC shareholders. Your earnings per share are being sliced to help our mai baap sarkar, and fellow shareholders of Indian Oil, HP, and BP.

This is corporate misgovernance of a high order. Now, not only do oil companies have to bear the political costs of the UPA’s subsidy follies, but the burdens can be arbitrarily inflicted at the last minute - just before the books are closed.

This means the UPA is cheating both taxpayers - whose revenues are being used to subsidise consumers for political gains - and investors, who own large chunks of both upstream and downstream companies.

The circle of loot spread last year to Life Insurance Corporation (LIC) as well, when the insurer was forced to pick up shares in ONGC when no one else was interested. LIC is now nursing huge losses on its holdings of ONGC, with the market value of the share falling to Rs 250 (purchase price: Rs 303)

Earlier, with a massive budget hole to fill, the finance minister was making huge demands on other cash-surplus companies like Coal India, which led Coal Minister Sriprakash Jaiswal to make allusions to "blood-sucking" mosquitoes. The remarks, he claimed, were not about the finance ministry. No one was fooled.

What is clear is that the loot of cash-rich public sector entities continues unchecked. Will someone tell the UPA to stop this loot in the name of the aam aadmi? Given Pranab Mukherjee’s poor record in defending the public sector’s financial autonomy, maybe he should, after all, be relieved of his job and sent to Rashtrapati Bhawan.