Tit for tat: ONGC in Russia to pay for Sistema's licence cancellation?

The impact of the Supreme Court's 2G licence cancellation order is so far reaching that indications are it would even impact India's quest for self reliance in the energy sector.

This is because among the licences that got cancelled was those of a joint venture of Sistema, a company owned by Russia, a country where our own state-owned oil explorer ONGC Videsh has a few assets.

RS Sharma, former chairman of ONGC, the parent company of ONGC Videsh, has told Economic Times that action on Sistema will have a long term impact on ONGC Videsh.

"No one in the company (ONGC Videsh) will admit it now, but it is obvious that the way the Indian side has treated Sistema by cancelling its 2G licences will have a long-term impact on the way the Russians will treat Indian interests in the Imperial asset," Sharma has been quoted as saying in the ET.

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Sharma was heading ONGC when it acquired Siberian oilfields of Imperial Energy for $2.1 billion through ONGC Videsh.

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Sistema holds 56.68 percent stake in Sistema Shyam Teleservices and had invested $3.1 billion in the venture. In February 2012, the Supreme Court had cancelled 21 of its 22 licences in India along with 101 other permits issued by former telecom minister A Raja.

Russian business conglomerate Sistema's Chairman Vladimir Yevtushenkov toldThe Hinduin an interview in 2012 that despite the setback,the company's relationship with India will continue.

Yevtushenkov also said that Sistema had done no wrong, and had come to India on the invitation of the Indian government and complied with all legal and regulatory requirements before entering the market. "It (Sistema) believes that the Supreme Court, in its order dated February 2, 2012, didn't consider several relevant submissions made by Sistema Shyam TeleServices, which were specific and unique to its case.

"We believe that we are being unfairly penalised for acting in good faith and in reliance on the appropriateness of the procedures established by India's telecommunications authorities," he said.

In December 2009, Sistema and ONGC signed a strategic partnership agreement.ONGC's foreign arm, ONGCVidesh Ltd,had acquired Imperial Energy in 2009 for $2.1 billion but it was not able to generate a decent profit due to exorbitant taxes.

Although executives were hoping for special dispensations, that eventually did not happen.

OVL managing director DK Sarraf told ET that the company has a comprehensive strategy in place to revive the languishing assets, but Sharma believesthe Sistema episode would influence Russia's approach towards the company.

In 2011, OVL had also planned to mergeONGC's Russian assets with Sistema-promoted Bashneft and RussNeft in a deal that would give the Indian company access to Trebs & Titov oilfields, boost profitability of its Imperial Energy and ownership of 25 percent stake. However, the plan did not work.

It seems, the road ahead for OVL will be tough in Russia.