Investment banker Goldman Sachs raised corporate governance issues with the Oil and Natural Gas Corporation on Thursday, saying the government took $20 billion in cash over the past six years from the company without consulting minority shareholders.

'Since 2003-04, the promoter (the government of India, which owns a 74 per cent stake in the company) has taken away cash from the company on a quarterly basis for subsidising loss-making state-owned downstream companies. So far, ONGC's [Get Quote] promoters have taken cash of almost $20 billion from the company without consulting the minority shareholders,' Goldman said in its latest report.

ONGC gives discounts on the crude oil it sells to state-owned refiners to partly make up for the losses they incur on selling fuel below cost.

The company's Chairman and Managing Director R S Sharma denied compromising on corporate governance. "We give corporate governance utmost importance. At no point has ONGC compromised on corporate governance issues."

He said the decision to give out subsidy on fuel is taken after deliberation at the board level and the government was justified in asking for such discounts. Unlike global peers, ONGC does not have a production sharing regime with the government on the oil and gas it produces from the fields given to it on a nomination basis.

Under the production sharing regime, companies share a certain percentage of the oil and gas they produce with the government, which is the owner of the mineral resource.

'Despite repeated objections raised by investors and more recently by independent directors on ONGC's board, there has not been headway on this issue,' Goldman said. 'The market appears to have got used to this practice by ONGC promoters, while similar issues in privately run companies would likely cause serious concern.

'We believe minority shareholders are likely to suffer in a situation where their interests are poorly protected. Moreover, such ad-hoc cash withdrawals hurt ONGC even more since it has a poor production profile and revenues are effectively a function of their oil realisation,' it said.

Goldman reiterated its sell rating on the stock and retained the price target at Rs 574 a share. It said ONGC today was 'effectively in a no-man's land.

'If one takes a view that oil prices will go down, one should avoid ONGC and if the view is that oil prices will go up there are better oil players in India and the region. If one does not wish to take an oil price view, then ONGC has enough core issues to keep it unattractive,' it added. 'ONGC has hardly any near-term catalysts to get us excited about the stock. ONGC's discoveries in KG Basin are unlikely to start production before FY'13.'

While the management has been talking about ONGC Videsh as the growth driver for the group, Goldman said the company has missed good acquisition opportunities in the past to regional peers when oil prices were moving up. 'The one big ticket acquisition that OVL has made (Imperial Energy bid in August 2008) came at the peak of the oil cycle and we view it as having been expensive,' it said.