What are PSUs in Indian

economy?
The term public sector undertaking or Enterprise refers to a Government
Company. Government Company is defined under Section 2 (45) of the
Companies Act, 2013 as Any company in which not less than fifty-one per cent of
the paid-up share capital is held by the Central Government, or by any State
Government or Governments, or partly by the Central Government and partly by
one or more State Governments, and includes a company which is a subsidiary
company of such a Government company. The term is not intended to mean a
public company (where shares are freely transferable and has a shareholder
base of more than 200 people) though public sector enterprises are mostly public
companies.
Public Sector undertakings refer to commercial ventures of the Government
where user fees are charged for services rendered. The tariff/fees may be market
based or subsidised. They are usually fully owned and managed by the
Government such as Railways, Posts, Defence Undertakings, and Banks etc.
Public sector enterprises on the other hand refer to those companies registered
under the Companies Act, 1951,which are predominantly owned by Government
and which are managed by a Government appointed Chairman and Managing
Director. Government nominees represent the interests of the Government on
the board of Public sector enterprises. Public sector companies usually compete
with private sector enterprises in the domestic as well as international market.
Investment decisions of PSUs are passed by the respective boards and then
appraised and approved by the administrative ministry to which they are
accountable (e.g. Shipping Corporation of India is under the Department of
Shipping in the Union Ministry of Surface Transport) or the Public Investment
Board under the Department of Expenditure, Union Ministry of Finance and if the
investment is beyond a certain threshold level or if a new public sector company
is being created, then the proposal has to be approved by Cabinet. Central public
sector enterprises are classified as mahratnas mini-ratnas and other
enterprises depending on their track record based on guidelines approved by the
Government from time to time.
Sub national governments also own and manage public sector undertakings and
in most cases they are loss making and require considerable budgetary support.
The audit of public sector undertakings is done by the Comptroller and Auditor
General of India while that of public sector enterprises is done first by Chartered
Accountants and the supplementary audit is done by the Comptroller and Auditor
General of India.

Evolution of PSUs in India

At the time of independence in 1947, Indian industry was ill-developed and
required considerable policy thrust. The Second Five year Plan (1956-61) and the
Industrial Policy Resolution of 1956 provided the framework for public sector
undertakings/enterprises in India, which were expected to play a substantial role
in preventing the concentration of economic power, reducing regional disparities
and ensuring that planned development serves the common good. A list of 17
industrial sectors was reserved for the public sector in Schedule A of the 1956
Resolution and no new units in the private sector in these categories would be
permitted. Another list of industries was included in Schedule B where the
Government actively encouraged public ownership. The Union Government and
various sub-national governments made considerable investment on setting up
and running public sector undertakings/enterprises.
Initially, the public sector was confined to core and strategic industries such as
irrigation projects (e.g. the Damodar Valley Corporation), Fertilizers and
Chemicals (e.g. Fertilizers and Chemicals, Travancore Limited) Communication
Infrastructure (e.g. Indian Telephone Industries), Heavy Industries (e.g. Bhilai
Steel Plant, Hindustan Machine Tools, Bharat Heavy Electricals, Oil and Natural
Gas Commission etc.). Subsequently, however, the Government nationalized
several banks (starting with nationalization of the Imperial Bank of India which
was renamed State Bank of India in 1955) and foreign companies (Jessop & Co,
Braithwaite & Co, Burn & Co.).Later Public Sector companies started
manufacturing consumer goods (e.g. Modern Foods, National Textile Corporation
etc) and providing consultancy, contracting, and transportation services.
The internal (profits) and extra-budgetary resources (borrowed funds) of public
sector undertakings are factored into the preparation of the Annual Financial
Statement (Budget) of the Government. However, poor productivity, poor project
management, over-manning, lack of continuous technological upgradation, and
inadequate attention to R&D and human resource development resulted in a
large number of public enterprises showing a very low rate of return on the
capital invested and the need for budgetary support for day to day running.
Several of them accumulated huge losses and ran up huge debts which had to
be written off /settled from time to time by the Government.
Reviewing the role of the public sector, the Industrial Policy Resolution 1991
reduced the number of industrial undertakings exclusively reduced to the public
sector to just six areas which included strategic industries like atomic energy,
defence, coal, mineral oils etc. as well as railway transport. Efforts were made to

divest non-strategic public sector industries and to increase private participation

in the equity of profitable public sector industries. At the same time a Board for
Reconstruction of Public Sector Enterprises has been set up to suggest ways to
turn around sick and loss making public sector enterprises.

ONGC
In 1955, Government of India decided to develop the oil and natural gas
resources in the various regions of the country as part of the Public Sector
development. With this objective, an Oil and Natural Gas Directorate was set up
towards the end of 1955, as a subordinate office under the then Ministry of
Natural Resources and Scientific Research. The department was constituted with
a nucleus of geoscientists from the Geological survey of India. In April 1956, the
Government of India adopted the Industrial Policy Resolution, which placed
mineral oil industry among the schedule 'A' industries, the future development of
which was to be the sole and exclusive responsibility of the state.Oil and Natural
Gas Corporation was established in 1959 and was incorporated on March 26,
1993 under the companies Act 1956 after converting a statutory commission
namely Oil and Natural Gas Commission into a public limited company. ONGC is a
schedule 'A' Navratna Company under the administrative control of the Ministry
of petroleum and Natural Gas with 74.14% shareholding of the Government of
India.
Since its inception in, Oil and Natural Gas Corporation (ONGC) has been
instrumental in transforming the country's limited upstream sector into a large
viable playing field, with its activities spread throughout India and significantly in
overseas territories. In the inland areas, ONGC not only found new resources in
Assam but also established new oil province in Cambay basin (Gujarat), while
adding new proliferous areas in the AssamArakan Fold Belt and East coast
basins (both inland and offshore).
ONGC went offshore in early 70's and discovered a giant oil field in the form of
Bombay High, now known as Mumbai High. This discovery, along with
subsequent discoveries of huge oil and gas fields in Western offshore changed
the oil scenario of the country. Subsequently, over 5 billion tonnes of
hydrocarbons, which were present in the country, were discovered. The most
important contribution of ONGC, however, is its selfreliance and development of
core competence in E&P activities at a globally competitive level.
The liberalized economic policy, adopted by the Government of India in July
1991, sought to deregulate and delicense the core sectors (including petroleum
sector) with partial disinvestments of government equity in Public Sector

Undertakings and other measures. As a consequence thereof, ONGC was re

organized as a limited Company under the Company's Act, 1956 in February
1994.
After the conversion of business of the erstwhile Oil & Natural Gas Commission to
that of Oil & Natural Gas Corporation in 1993, the Government disinvested 2 per
cent of its shares through competitive bidding. Subsequently, ONGC expanded
its equity by another 2 per cent by offering shares to its employees.
During March 1999, ONGC, Indian Oil Corporation (IOC) a downstream giant
and Gas Authority of India Limited (GAIL) the only gas marketing company,
agreed to have cross holding in each other's stock. This paved the way for long
term strategic alliances both for the domestic and overseas business
opportunities in the energy value chain, amongst themselves. Consequent to this
the Government sold off 10 per cent of its shareholding in ONGC to IOC and 2.5
per cent to GAIL. With this, the Government holding in ONGC came down to
84.11 per cent.
In the year 200203, after taking over MRPL from the A V Birla Group, ONGC
diversified into the downstream sector. ONGC will soon be entering into the
retailing business. ONGC has also entered the global field through its subsidiary,
ONGC Videsh Ltd. (OVL). ONGC has made major investments in Vietnam,
Sakhalin and Sudan and earned its first hydrocarbon revenue from its investment
in Vietnam.
A joint venture company, Petronet LNG is in place with ONGC having 12.5%
equity interest for import and marketing of LNG in India. Other partners in this
venture are IOC, GAIL and BPCL each with 12.5% equity. The remaining 50%
equity will be offered to strategic partners, financial institutions and public. The
Company is planning to install two LNG terminals (Dahej in Gujarat and Cochin in
Kerala) on western coast of India with total capacity of 7.5 MMTPA.
The Exploration Contract Monitoring (EXCOM) Group is the exclusive business
face of ONGC for jointly operated oil & gas exploration and production ventures
within India. It is the nodal agency of ONGC for single window E&P business
communication with companies and the government.
Business area of the company includes: International sale/import of Crude Oil
Export of Petroleum Products and Petrochemical Products. Oil and Natural Gas
Corporation Ltd. (ONGC) is engaged in E&P activities both in Onshore and
Offshore. The Corporation is now venturing out to new areas i.e. deepwater
exploration and drilling, exploration in frontier basins, marginal field
development, optimization of file development plan field recovery and other
allied areas of service sector.ONGC has singlehandedly scripted Indias
hydrocarbon saga by establishing 6.61 billion tonnes of Inplace hydrocarbon
reserves with more than 300 discoveries of oil and gas; in fact, 6 out of the 7
producing basins have been discovered by ONGC.

Subsidiaries:
ONGC Videsh Limited (OVL) The biggest Indian multinational, with 44 Oil &
Gas projects (7 of them producing) in 18 countries.
ONGC Nile Ganga BV (ONG BV) ONGC Nile Ganga BV is a wholly owned
subsidiary of OVL and has equity in producing field in Sudan.
Mangalore Refinery and Petrochemicals Limited (MRPL) Mangalore Refinery
and Petrochemicals Limited (MRPL), located in a beautiful hilly terrain north of
Mangalore city on west coast of India, have a State of Art Grass root Refinery at
Mangalore and is a subsidiary of ONGC. The Refinery has got a versatile design
with high flexibility to process Crude oils of various API and with high degree of
Automation.
ONGC Narmada (ONL): It is engaged in E & P activities in Nigeria. It holds
13.5% of PI in deep water exploration Block2 in NigeriaSaoTome & Principe
ONGC Amazon Alaknanda (OAAL): Its subsidiary of OVL & holds stake in E & P
activities in Colombia through Mansarovar energy Columbia ltd,a 50:50 JV with
sinopec of china.
ONGC Mittal energy : OVL has entered 51:49 JV with Mittal Investment Sarl
(MIS)

Achievements/ recognition:
2013
ONGC receives global recognition as oil major named in Green Rankings
ONGC is the only Indian energy major in Fortune's Most Admired List 2014
under 'Mining, Crude Oil Production' category.
ONGC bagged the FICCI sports award for the third time in a span of twelve
years which speaks volumes of the managements commitment towards sports
promotion in the country.
2012
ONGC Videsh signs definitive agreements to acquire an interest in the Azeri,
Chirag and the Deep Water Portion of the Guneshli Fields in the Azerbaijan sector
of the Caspian Sea and an interest in the BakuTbilisiCeyhan Pipeline.
ONGC inks agreement with Cairn India to use gas from North Tapti fields
2011
Awarded the ""Leading Oil and Gas Corporate of the Year"" and ""Exploration
and Production Company of the Year"" in the Petroleum Federation of Indias

Annual Oil and Gas Industry Awards 2010.

Sri lanka government awarded 3 hydrocarbon blocks to ONGC
ONGC Petro additions Ltd (OPaL) awards Rs 1,980 cr contracts for polyolefin
projects
Staterun ONGC regained its top most rank after 4 years propelling billionaire
Mukesh Ambaniled Reliance Industries (RIL) as the country's most valued
company.
ONGC won Petrofed Oil & Gas Industry Awards 2011 in three categories
'Exploration & Production: Company of the Year', 'Project Management (above Rs.
2000 crore): Company of the Year' and 'Innovator of the Year: Team (Won by
IOGPT)
ONGC bagged Oil Industry Safety Directorate (OISD) awards for 'Best Overall
Safety Performance of Oil and Gas Onshore Assets' and 'Most Consistent Safety
Performer Award' (won by Rajahmundry Asset of ONGC) for the year 201112. In
addition, JV operation at Panna gas field between ONGC, BG and Reliance,
operated by BG India won the OISD award for 'Best Production Platform Pvt/JV
Companies
2010
Oil & Natural Gas Corporation Ltd was granted the 'Maharatna' status.
Ranked 1st among oil and gas exploration and production companies in the
world and 18th among leading global energy majors as per Platts 250 Global
Energy Companylist.
Awarded 1st runners up for =Best Presented Accounts and Corporate
Governance Disclosure Awards 2009 by South Asian Federation of Accountants,
an apex body of South Asian Association for Regional Cooperation.
Selected as the Natural Gas STAR Programs International Partner of the Year
by the United States Environmental Protection Agency.
Awarded the Golden Peacock Award for climate security.
Awarded the gold trophy for SCOPE Meritorious Award for Research &
Development, Technology Development & Innovation for 200809.
Awarded the 2nd PSU Awards for highest market capitalization by Dalal Street
Investment Journal PSU awards.
Awarded the BML Munjal Award for excellence in learning and development in
public sector category.
Ranked at 2nd position in FE500 list 2010 in net worth and overall composite
ranking
ONGC ranks 3rd Oil & Gas Exploration & Production (E&P) Company in the
world and 23rd among leading global energy majors as per Platts 250 Global
Energy Companies List for the year 2009
ONGC ranks 24th among the Global publiclylisted Energy companies as per
PFC Energy 50 (Jan 2008)
Finance Asia 100 list ranks ONGC no 1 among Indian Blue Chips

 Occupies 155th rank in Forbes Global 2000 list 2010 of the worlds biggest
companies for 2010 based on sales, profits, assets and market capitalization
ONGC ranked 402nd position as per Fortune Global 500 2009 list based on
revenues, profits, assets and shareholders equity
Ranked as the most respected Public Enterprise in India in 2007 Business
World Survey, with 19th position in the league of the mostrespected Indian
Corporate(s)
Rated Excellent in MOU Performance Rating for 200607 by the Department of
Public Enterprises, Ministry of Heavy Industries in Public Enterprises, GOI
Oil Industry Safety Directorate (OISD) has selected Ahmedabad Asset and MRPL
for the year 200607 (as number one in Group4 category (Oil & Gas Assets) and
Second in Group1 Refinery category respectively)
Topped the visibility metrics in Indian Oil and Gas Sector and the only PSU in
the top 10 list of Indian Corporate newsmakers
Golden Peacock Global Award 2007 for Excellence in Corporate Governance
2007, for the 3rd consecutive time, conferred by World Council for Corporate
Governance. Bagged the coveted winners trophy of the maiden Earth Care
Award for excellence in climate change mitigation and adoption under the
category of GHG mitigation in the small/medium and large enterprises.
Conferred with Infraline Energy Excellence Award for its services to the
Nation in Oil & Gas Exploration and Production category
Bestowed with Amity Award for Excellence in Cost Management
Future Plan:ONGCs strategic objective of sourcing 20 million tonnes of equity oil
abroad per year is likely to be fulfilled well before 2020.

Study the internal and external factors

that contributed to the growth of ONGC.
The main three internal factors contributing to the
growth of ONGC are-:
1. Technology Upgrades
2. Human Resources Development
3. Financial restructuring
1. Technology Upgrades: ONGC realized during the late 1990s that out dated
and obsolete technologies were not only leading to high operation and
maintenance costs but also was acting as an impediment to its high growth

plans. To enhance the recovery quantities from basins which were near their
maturity phase, they employed technology-enabled measures such as Increased
Oil Recovery (IOR) and Enhanced Oil Recovery (EOR). Enhanced Oil Recovery is a
generic term for techniques for increasing the amount of oil that can be
extracted from an oil field. Using EOR, 30-60 %, or more, of the reservoir's
original oil can be extracted compared with 20- 40% using primary and
secondary recovery. Another modern technology used was SCADA (Supervisory
Control & data Acquisition), which facilitated around-the-clock monitoring and an
automated sensory system for each oil well. ONGC also invested in developing
Virtual Reality Interpretation Centers with applications in exploration, drilling and
engineering. Other measures included horizontal drilling, side- tracks, in-fill
drilling, water injection, chemical & thermal methods to enhance oil recovery.
Extensive investments were also made in IT, covering Enterprise Resource
Planning (ERP), Control Systems and Communication Networks.
2. Human Resources Development: As part of ONGCs Vision & Mission
statement, the HR policy was aimed to Foster a culture of trust, openness and
mutual concern to make working a stimulating and challenging experience for
our people. To overcome the problem of overstaffing and procedural delays,
ONGC revamped all internal processes to facilitate faster file processing. It also
redesigned its appraisal system by introducing a new result oriented incentive
and reward scheme like the Productivity Honorarium Scheme, Quarterly Incentive
Scheme, Group incentives for Cohesive team working and reward and
recognition scheme. ONGC also established the Institute of Management
Development (IMD), later named ONGC academy. It had an ISO 9001 certification
for designing parameters to measure the performance of human resources,
succession planning, work climate and work culture analysis, managing change
and other areas of research related to management development. Seminars,
Conventions, Workshops, interactive brain-storming sessions were introduced to
involve all the employees at regular intervals. In 2001, ONGC launched the
SHRAMIK Project (Integrated System of Human Resource Automated
management Information). This was an integrated, online HR system where all
transactions were done through computers. This new system was expected to
help streamline systems and procedures, minimizing processing time and
administrative costs, improving level of employee satisfaction and enhancing the
quality of decision making.
3. Financial Restructuring: Here again, ONGC strived to improve its
operational efficiencies and reduce costs. ONGC had huge cash reserves on the
one hand and huge interest outgo due to foreign debt on the other hand. ONGC
thus took steps to make itself a zero-debt company. The excess cash was then
employed to acquire better technology which would support its growth
momentum. ONGC was also entitled to huge tax-concessions after its takeover of
loss making MRPL, which was a strategic move to acquire assets which would not
only have taken years for ONGC to develop otherwise but also reduce the overall
cost for acquisition of such assets. Related functions such as Treasury
management, Budget Control, Expenditure Monitoring and Reporting were also
streamlined. As a result of all these steps by ONGC and the resultant streamlined

operations, production output increased from 24.7 million tons in 2001 to 26

million metric tons in 2003.

The main external factor that contributed to

growth of ONGC was
Deregulation of the
Indian oil industry.
1. Deregulation: After the Government of India (GoI) deregulated the Indian Oil
industry from April 1, 2002 by doing away with APM, ONGC was in a very
strategic position where it could leverage on. Its strong investment base,
superior infrastructure and extended distribution network. As a result of this
deregulation, ONGC reported a 70% jump in net profits over the previous year
and an increase in revenue by 53.4% in 2002-03 over the previous year.
2. Strengths and Opportunities. The company is cash rich, and has very low
levels of debt. It has more than Rs 22000 cores in cash, as per its latest Balance
Sheet. This means that it can go on an acquisition spree. Its foreign arm, ONGC
Videsh (OVL) is acquiring energy assets in foreign countries in the Middle East,
Latin America, Asia and Africa. This cash is a significant asset; it means that it
can obtain cheap financing from lenders to fund its acquisitions. Having financial
resources also means that it can foray into renewable sources of energy such as
solar and wind. The company obviously does not want to put all its eggs in the
exhaustible fuel basket, and wishes to diversify and thus ensure long term
relevance. The company is a financial behemoth and can afford to throw its
weight around. Witness the recent acquisition of UK based Imperial Energy Ltd.
ONGC outbid companies from many other countries, including China. The case
under analysis mentions that ONGC has implemented a slew of technological
improvements, adding high technology assets and processes to increase
productivity. A marked improvement in the financial situation of the company has
enabled it to invest wisely in improving and streamlining processes and
enhancing capability. The company also needs to manage its talent effectively
and stem attrition to private companies. Towards this end the company has
instituted several measures to increase employee satisfaction and improve talent
(as detailed in the case). The company is also providing perks and other benefits
to the employees in an attempt to curb attrition. In the wake of the finalization of
the nuclear deal between India and the US, ONGC has announced that it will start
surveying for uranium deposits in India, to fuel the nuclear energy boom that is
surely to come in the near future. ONGC also is the countrys biggest Oil (77%)
and Natural gas (81%) producer. The company has licenses to explore huge
swathes of Indias surface for oil and gas deposits. It also owns and operates
more than 19,000 kms of pipelines in the country (both offshore and sub-sea).
Until recently the company was the largest corporation in India, in terms of
market cap. The company controls Bombay High oilfields, which produce more
than 38% of all domestic crude. Having acquired MRPL, the company is in a good
position to diversify into downstream activities. In fact ONGC has set up a test
retail outlet in Mangalore under its Retail arm OVaL (ONGC Values). The company

will sell finished petroleum products under the brand name RelaxTop. This means
that the company is secure from the cyclical nature of oil prices.
3. Weaknesses and Threats: ONGC is owned by the Indian government. The
government decides where the company can diversify and controls its sphere of
influence and control. Witness the government vetoing ONGCs intention to
venture into shipping and insurance. The government is the owner and the
decision maker in most matters. The company has tried its best to
professionalize and has succeeded to a large extent. However, the government
has placed restrictions as to what areas the company can operate in. ONGC is
pretty much dependant on one industry, and its oil fields are giving declining
yields of oil. The company needs more flexibility in terms of its areas of
operations and needs to diversify. ONGC is affected by the ups and downs of the
international prices of oil. Indian oil companies like HPCL and BPCL have to sell
finished petroleum products at subsidized rates, i.e. they have to bear losses
(under recovery). ONGC has to compensate them for the under recoveries.
(ONGC gives these companies discounts in the purchase of crude oil, LPG etc). If
international prices of oil rise, then under recoveries are high. The price of crude
oil touched nearly USD 150 per barrel in the past few months, and the under
recoveries hit the roof. Because of increase under recoveries, ONGC had to put
its retail venture OVaL on the back burner for the time being. ONGC is also prone
to having its employees being poached by private companies.

Profit and Losses of ONGC

Profit and Losses for 3/15 to 3/16

Parameter

MAR'16
( Cr.)

MAR'15
( Cr.)

Change %

Gross Sales

78,565.19

83,093.47

-5.45%

Less :Inter divisional transfers

0.00

0.00

0.00%

Less: Sales Returns

0.00

0.00

0.00%

Less: Excise

197.12

222.51

-11.41%

Net Sales

78,368.07

82,870.96

-5.43%

Increase/Decrease in Stock

20.59

-169.29

112.16%

Raw Materials Consumed

1,512.07

888.87

70.11%

Power & Fuel Cost

511.87

390.12

31.21%

Employee Cost

8,736.94

8,626.09

1.29%

Other Manufacturing Expenses

19,135.48

23,793.74

-19.58%

General and Administration Expenses

25,554.24

25,383.81

0.67%

Selling and Distribution Expenses

265.16

259.30

2.26%

Miscellaneous Expenses

8,427.67

12,922.18

-34.78%

Expenses Capitalised

0.00

0.00

0.00%

Total Expenditure

64,164.01

72,094.81

-11.00%

EXPENDITURE:

PBIDT (Excl OI)

14,204.0
6

10,776.1
5

31.81%

Other Income

23,955.15

27,240.18

-12.06%

Operating Profit

38,159.2
1

38,016.3
3

0.38%

Interest

4.99

2.79

79.01%

PBDT

38,154.22

38,013.55

0.37%

Depreciation

11,621.69

11,458.31

1.43%

Profit Before Taxation & Exceptional

Items

26,532.53

26,555.23

-0.09%

Exceptional Income / Expenses

-3,142.21

0.00

100.00%

Profit Before Tax

23,390.3
2

26,555.2
3

-11.92%

Provision for Tax

7,386.68

8,822.28

-16.27%

PAT

16,003.6
5

17,732.9
5

-9.75%

Extraordinary Items

0.00

0.00

0.00%

Adj to Profit After Tax

0.00

0.00

0.00%

Profit Balance B/F

0.00

0.00

0.00%

Appropriations

16,003.65

17,732.95

-9.75%

Equity Dividend (%)

170.00

190.00

-10.53%

Earnings Per Share (in )

18.71

20.73

-9.75%

Book Value (in )

176.94

168.37

5.09%

CONCLUSION
After studying the detail of O.N.G.C LTD I reached at conclusion that O.N.G.C has
achieved its entire desire goal with its hard work and unique idea. O.N.G.C is
having a good manpower and provides good facilities to their employees. The
majority of the company's profitability ratios show an increasing trend. The
performance of the company can be considered as satisfactory. As per my
opinion that O.N.G.C LTD has a wide scope to develop in coming years.