Andersen's road map for ONGC's foreign investments

Vol 5, PW 10 (04 Jul 01) People & Policy

Arthur Andersen has prepared a detailed road map for ONGC to better manage an estimated $1.9bn of overseas investment over the next four years at Sakhalin, Vietnam and Iraq.

So detailed in fact, that ONGC's board is now complaining that Andersen (like Justice Mahajan above) exceed its brief! Jayant Mauskar, joint secretary exploration, is having a "conceptual problem" with the study, while Ravi Saxena, joint secretary finance, wants to see Andersen's "terms of reference" and argues there was no need to carry out such a detailed evaluation. Both are ministry nominees on ONGC's board.

ONGC appointed Andersen to evaluate the capital structure ofONGC Videsh on 9th March following a landmark agreement with Rosneft a month earlier to acquire 20% of the Sakhalin development in Russia's far east for $1.78bn. This is the largest foreign investment by an Indian company and a first tranche of $340m was transferred on 30th May.

Its sheer enormity has jolted ONGC to find the most tax efficient way to manage the cash transfer. More, it has forced ONGC to face up to a critical question: should it carry the investment risk of its external arm on its own balance sheet Or should ONGC Videsh take responsibility for its decisions and carry the risk itself Key questions that ONGC must now answer.