OVL to get more powers to okay projects

NEW DELHI, April 30: The board of ONGC Videsh Limited would soon have powers to sanction projects entailing investment up to $ 50 million (...

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NEW DELHI, April 30: The board of ONGC Videsh Limited would soon have powers to sanction projects entailing investment up to $ 50 million (Rs 180 crore) without prior permission of the Cabinet.

At present, pubic sector undertakings are permitted to sanction projects up to Rs 50 crore without the Cabinet’s permission. The 1997-98 budget proposes to raise the limit to Rs 100 crore.

The enhanced investment limit for OVL constitutes the petroleum ministry’s strategy to impart greater financial and administrative autonomy to ONGC’s wholly-owned subsidiary. The ministry’s rationale is that, vested with greater powers, OVL would be in a position to acquire crude oil reserves abroad and help augment the dwindling domestic output.

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Estimates indicate that while the country’s demand for petroleum products would be 120 million tonnes by 2001-02, domestic production of crude oil would be limited to 40 million tonnes. The gap would require to be filled through import of crude oil.

Since greater dependence on import would entail higher outflow of foreign exchange and hardening of international prices, the aim is to ensure oil security by acquiring oil equity abroad to increase access to crude oil.

According to the ministry’s proposal, projects – in which OVL’s investments exceed $ 50 million – would be vetted by the Empowered Committee prior to seeking the approval of the Cabinet.

All projects, however, would need to be appraised by financial institutions or international consultants. However, OVL would not be provided with any budgetary support for these projects.

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While seeking the limit enhancement, the ministry has sought removal of foreign exchange control requirements for OVL’s overseas investments.

The cumulative investment ceiling for each year would be decided in consultation with the finance ministry. The present investment ceiling, as approved by the Cabinet in 1989, stands at $ 150 million for a six-year period.

OVL’s mandate would be expanded to include development of oilfields and production besides exploration of crude oil and natural gas. This provision would enable OVL to acquire discovered oil blocks where the investment risks are low.

However, its operations would be restricted to a list of specified countries which would be revised from time-to-time in consultation with ministry of external affairs. OVL would be authorised to float subsidiary or joint venture companies in these countries .