Memo to Sebi: Is govt licensed to rob minority investors?

By Raman Kirpal

If you are an investor in the oil sector, these figures should worry you: Rs 20,370 crore. That’s the money the government has confiscated from the profits of ONGC, Oil India and GAIL India in the past three years (2008-11) to keep some other oil companies afloat.

If you are a taxpayer, this figure should worry you: Rs 1,38,292 crore. This is the money your government has paid from your tax revenues as subsidies to oil marketing companies just to keep them going. Rs 1,38,292 crore would have financed nearly four years of the NREGA scheme.

How did we arrive at these numbers? A colleague of ours filed an RTI with the oil ministry, and the figures they disclosed are mind-boggling. During the three years, the three oil and gas producing companies were forced to subsidise the oil marketing companies (Indian Oil, etc) to the tune of Rs 63,821 crore.

More from Blogs

Key differences between third party, comprehensive & zero depreciation bike insurance coverage These lucky members played the CRED bounty and won massive prizes, including Rs 1.5 lakh cash, a PS5, and more: Here’s how you can win as well!

[caption id=“attachment_92819” align=“alignleft” width=“380” caption=“If one were to calculate the proportionate share of subsidies borne by minority, non-government shareholders, it works out to Rs 20,370 crore. Reuters”]  [/caption]

But not all that loss accrued to investors. Public shareholders in ONGC account for 25.86 percent, in Oil India 21.57 percent and in Gail India 42.66 percent. So if one were to calculate the proportionate share of subsidies borne by minority, non-government shareholders, it works out to Rs 20,370 crore.

Why isn’t Sebi investigating how the government is robbing minority shareholders of their share of profits from the oil and gas producing companies?

This isn’t the only loss they bear. Investors also have to put up with a government-company discount on their shares, thanks to such wayward subsidy policies that rightfully ought to come from the budget directly. But for these subsidies, the shares of ONGC, Oil India and Gail would be much, much higher.

The taxpayer losses, of course, are of a different nature. Since the money is actually funnelled into the oil marketing companies by way of subsidies or oil bonds, non-government minority shareholders actually “benefit.”

Taking the 21 percent, 45 percent and 48 percent public shareholdings in Indian Oil, Bharat Petroleum and Hindustan Petroleum into account, the total taxpayer subsidies of Rs 1,38,292 crore to these companies work out to a proportionate investor gain of Rs 444,66 crore.

[caption id=“attachment_92816” align=“alignleft” width=“610” caption=“Source: RTI query by Raman Kirpal/Firstpost”]  [/caption]

But, of course, this is not really something minority shareholders will appreciate for they have suffered huge capital losses on their holdings in oil marketing companies due to the perception that they will never really be growth tigers. They will live on crumbs thrown from the government’s coffers.

[caption id=“attachment_92818” align=“alignleft” width=“610” caption=“Table 2”]  [/caption]

Once again, Sebi should investigate how profits from one set of listed companies (ONGC, etc) are transferred to the oil marketing companies (BPCL, HPCL, etc) in complete disregard for corporate governance norms.

If a private group were to transfer money from one company to another, Sebi would come down on them like a ton of bricks. But when government does the same, why does it keep quiet?