Finance Minister Nirmala Sitharaman has deferred the planned Rs 15,000 crore equity infusion in state-owned fuel retailers to the next financial year.
Initially announced in last year’s budget, the equity support was intended to aid Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL), and Hindustan Petroleum Corporation Ltd (HPCL) in their energy transition projects. However, in the recent interim budget for 2024-25, Sitharaman revealed that the allocation for this fiscal year has been deferred to 2024-25.
The Finance Secretary, T V Somanathan, explained that the reassessment of capital expenditure requirements led to a reduction in the allocated amount to Rs 15,000 crore, and this sum is now deferred to the next fiscal year. Notably, there is no provision for funds in either the current or the next fiscal year for filling strategic reserves, including those in Mangalore and Visakhapatnam.
The decision to defer the equity support might be influenced by the improved profitability of the three fuel retailers in the current fiscal year, partially compensating for losses incurred in the previous fiscal year. Despite lower retail selling prices persisting for the past 21 months, these firms are experiencing profitability even as crude oil prices have softened.
While Oil and Natural Gas Corporation (ONGC) and GAIL (India) Ltd are also making significant investments in achieving net-zero carbon emissions, the equity support is currently limited to the three fuel retailers. The budget for 2023-24 had allocated Rs 35,000 crore for priority capital investments in energy transition and net-zero objectives. This included Rs 30,000 crore for capital support to oil marketing companies and the remainder for purchasing crude oil for strategic reserves.
Industry sources speculate that the government’s decision could be tied to efforts to limit the fiscal deficit to 5.80 per cent of GDP for the current fiscal year ending March 31. Additionally, it is noted that Indian Oil Corporation and Bharat Petroleum Corporation Ltd had approved rights issues last year, with the government set to participate, while Hindustan Petroleum Corporation Ltd may receive indirect infusions through ONGC.
(With PTI inputs)