Divisions at ONGC over future policy direction

Vol 3, PW 21 (10 Nov 99) People & Policy

Deep division have emerged on the board of ONGC over the corporations future direction.

Chairman Bikash Bora is a strong advocate of reform, constantly emphasising the need to prepare ahead for a free market-pricing scenario in the oil and gas sector. Bora, however, faces concerted opposition to many of his ideas from colleagues on the board.

Without naming names, hostility centres on the following two issues: - Diversification: a significant portion of ONGC staff of all ranks feel it wrong that the corporation should diversify into non-core sectors such as power, refining and petrochemicals. In an MOU signed with the Indian Oil Corporation (IOC) on 7th September this year, ONGC commits itself to two IOC-backed residue-fired power projects in Gujarat (Savli) and Haryana, (Panipat); two refinery projects (Nagapatinam and Paradip), and two Paraxylene/PTA projects, also in Haryana and Gujarat.

"Diversification is important to survive competition but that does not mean one has to diversify into sectors where one does not have any experience", said one ONGC source on condition of anonymity. "We are yet to make up our mind n these projects", confirms Bora.

Consultants: ONGC personnel and directors are sharply divided on the value of hiring management consultants. In the firing line stand McKinsey and Gaffney Cline & Associates, both of whom are carrying out consultancy projects for ONGC.

They have the full backing of Chairman Bora, and the reformist wing of ONGC, but are viewed with hostility by conservative members of the board and other vested interests. Gaffney Cline has made few friends through its widely leaked letter complaining of Red Tape at ONGC while McKinseys Organisational Transformation Project is widely viewed with suspicion.

"Restructuring, if any, should be progressive. It should not work towards making the functioning difficult for the organisation", said another ONGC official, "The new systems put in place may not yield the kind of results expected".

Chairman Bora, meanwhile, is moving ahead with reform, despite the criticism. Last week he announced an eight-pronged financial restructuring package for ONGC: "We hope to have a reorganised structure at ONGC by the end of next year.

This will help our productivity go up by 10-15% and cut down our expenditure by 20%. Who is responsible for introducing this package You guessed it, McKinsey!

LNG Summit