Energy giant's `12,350 cr Q1 subsidy burden is 43% of total `29,000 cr under-recoveries of PSU oil firms
Helped by a fall in global crude prices and the ongoing deregulation of fuel prices, under-recoveries at oil marketing companies plunged an annual 40% in the first quarter of this fiscal, but upstream oil major ONGC has been given little relief, having to foot exactly the same amount of subsidy bill in the five quarters through Q1 FY14. This means in relative terms, the explorer’s share of the subsidy burden has gone up sharply in June quarter to 43% from 26% a year ago and 34% in the previous quarter.
ONGC will shell out `12,350 crore as its oil subsidy burden for the first quarter of FY14, representing about 43% of the `29,000 crore under-recoveries of OMCs, a company official informed.
In 2012-13, ONGC’s oil subsidy burden share stood at `49,421 crore or 31% of the overall `1.61 lakh crore under-recovery figure. This also means that upstream companies (ONGC and Oil India) will continue to bear subsidy of $56 per barrel, the same level as in the last two years. Terming the current subsidy mechanism unsustainable, ONGC has proposed a new formula for calculating upstream subsidy contribution. It has written to the government asking it to raise its realisations to $65 per barrel, from $38 at present.
OIL will pay around `1,800 crore as subsidy, in line with what was paid as subsidy last year. ONGC bears an additional $7 per barrel subsidy on account of gas condensates. This has not been revised by the government despite the upstream companies asking for lower discounts on account of falling crude oil prices. Global oil prices in April-June quarter hovered around $97-$101 levels. In contrast, average crude oil prices for 2012-13 averaged around $108.
Oil marketing companies including Indian Oil Corporation (IOC), Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL) sell diesel, kerosene and cooking gas at rates below market prices and get subsidies in the form of upstream discounts (from ONGC, OIL and GAIL) and cash compensations by the government.
In 2012-13, upstream companies including ONGC, OIL India and GAIL India compensated OMCs for around 38% of under-recoveries. Of this, ONGC generally shares the largest burden accounting for about 82% of upstream contribution. The remaining burden is borne by the government and a small portion has to be absorbed by the OMCs.
TK Ananth Kumar, director (finance) at OIL, said that the company has written o the government seeking a reduction in subsidy burden proportional to the fall in under-recoveries. Kumar, however, added the under-recovery numbers in the second quarter could be higher on account of the falling rupee.
Analysts state the government could be coughing up over `1.2 lakh crore worth of fuel subsidies in 2014, significantly higher than the `80,000 crore estimated for FY14 by the finance ministry in May this year. The finance ministry’s estimate of `80,000 crore was made when the rupee ruled at around `54.32 to the dollar. The Indian currency has since then slid below the `60 level.
Helped by a fall in global crude prices and the ongoing deregulation of fuel prices, under-recoveries at oil marketing companies plunged an annual 40% in the first quarter of this fiscal, but upstream oil major ONGC has been given little relief, having to foot exactly the same amount of subsidy bill in the five quarters through Q1 FY14. This means in relative terms, the explorer’s share of the subsidy burden has gone up sharply in June quarter to 43% from 26% a year ago and 34% in the previous quarter.
ONGC will shell out `12,350 crore as its oil subsidy burden for the first quarter of FY14, representing about 43% of the `29,000 crore under-recoveries of OMCs, a company official informed.
In 2012-13, ONGC’s oil subsidy burden share stood at `49,421 crore or 31% of the overall `1.61 lakh crore under-recovery figure. This also means that upstream companies (ONGC and Oil India) will continue to bear subsidy of $56 per barrel, the same level as in the last two years. Terming the current subsidy mechanism unsustainable, ONGC has proposed a new formula for calculating upstream subsidy contribution. It has written to the government asking it to raise its realisations to $65 per barrel, from $38 at present.
OIL will pay around `1,800 crore as subsidy, in line with what was paid as subsidy last year. ONGC bears an additional $7 per barrel subsidy on account of gas condensates. This has not been revised by the government despite the upstream companies asking for lower discounts on account of falling crude oil prices. Global oil prices in April-June quarter hovered around $97-$101 levels. In contrast, average crude oil prices for 2012-13 averaged around $108.
Oil marketing companies including Indian Oil Corporation (IOC), Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL) sell diesel, kerosene and cooking gas at rates below market prices and get subsidies in the form of upstream discounts (from ONGC, OIL and GAIL) and cash compensations by the government.
In 2012-13, upstream companies including ONGC, OIL India and GAIL India compensated OMCs for around 38% of under-recoveries. Of this, ONGC generally shares the largest burden accounting for about 82% of upstream contribution. The remaining burden is borne by the government and a small portion has to be absorbed by the OMCs.
TK Ananth Kumar, director (finance) at OIL, said that the company has written o the government seeking a reduction in subsidy burden proportional to the fall in under-recoveries. Kumar, however, added the under-recovery numbers in the second quarter could be higher on account of the falling rupee.
Analysts state the government could be coughing up over `1.2 lakh crore worth of fuel subsidies in 2014, significantly higher than the `80,000 crore estimated for FY14 by the finance ministry in May this year. The finance ministry’s estimate of `80,000 crore was made when the rupee ruled at around `54.32 to the dollar. The Indian currency has since then slid below the `60 level.
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