ONGC’s JV route for expansion

Upstream major ONGC has taken a strong liking to the JV route for its new ventures. Bypassing cumbersome procedures that slow down decision making is a bane for PSUs, especially for large investments. ONGC’s latest addition to the string of JVs it has started is a company that will implement a Rs 4,900-crore project to make 9.5 lakh tonnes of petrochemical paraxylene.

ONGC will have a 46% stake in this company, while MRPL has a 3% stake, capping the total PSU stake at 49% and the rest will be offered to financial institutions. Despite not having a majority stake, ONGC will have management control over the company. Investment and other decisions are expected to be faster, and there will be no caps on salaries that have to be paid to attract and retain the right talent.

A talent exodus to the private sector is an ill that afflicts PSUs. Earlier, the company had formed two JVs with the Mittal Group to scout for overseas oil & gas assets. Earlier this year, it had also signed an MoU with Shipping Corporation to form a JV to invest in offshore services, though that is yet to take off. Earlier this month, ONGC Mittal bagged two oil blocks in Nigeria, the first success for any of these joint ventures.

Given that ONGC’s projects, because of the nature of the sector, are usually large, the structure is important. The structure has worked so far, and is important a lot for ONGC as its projects are usually large projects, given the sectors it operates in. Since management control rests with ONGC, the government too should not have any objection.


Even other PSUs could use this route to expedite their investments, though not all have the clout and credibility that ONGC has to attract financial institutions as investors. Shipping Corporation of India is another PSU to have set up a few JVs on these lines.