Petrol price cut coming next? Modi govt halves capital infusion in OMCs

India has halved the amount of equity infusion in state-owned fuel retailers to Rs 15,000 crore for investments in energy transition projects, the finance ministry has said.

Finance Minister Nirmala Sitharaman had in her last Budget announced equity infusion of Rs 30,000 crore in Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) to support the three state-owned firms' energy transition plans.

She also proposed Rs 5,000 crore for buying crude oil to fill strategic underground storages at Mangalore in Karnataka and Visakhapatnam in Andhra Pradesh that India has built to guard against any supply disruptions. That plan has also been deferred in view of emerging trends in oil markets, the finance ministry said.

While other state-owned oil companies such as Oil and Natural Gas Corporation (ONGC) and GAIL (India) Ltd too have lined up billions of dollars of investment to achieve net zero carbon emissions, the equity support was limited to the three fuel retailers, who had suffered huge losses in 2022 when they held retail petrol, diesel and cooking gas (LPG) prices despite a spike in raw material (crude oil) prices following Russia's invasion of Ukraine.

The finance ministry in a post on X detailing the outcome of the budget announcements, informed about the halving of equity support and deferring of filling strategic reserves.

''The Budget (for 2023-34) provides Rs 35,000 crore for priority capital investments towards energy transition and net zero objectives, and energy security by the Ministry of Petroleum and Natural Gas,'' it said.

Of this, Rs 30,000 crore was towards capital support to oil marketing companies IOC, BPCL and HPCL for green energy and net zero initiatives, and the remaining for purchase of crude oil for caverns at Mangalore and Visakhapatnam, it said.

''During the Expenditure Finance Committee meeting held on November 30, 2023, it was decided a maximum of Rs 15,000 crore could be provided for equity infusion into OMCs in FY 2023-24,'' the finance ministry said without detailing the reasons for the decision.

Industry sources said the decision may be linked to a boost in profitability of the three firms in the current fiscal which has partly covered for the losses in the previous 2022-23 (April 2022 to March 2023) fiscal. The three are making good profit this year as the freeze in retail selling prices extends into the 21st month despite crude oil prices having softened.

On plan for purchase of crude oil for strategic storage, the finance ministry said: ''Department of Expenditure, Ministry of Finance, has recommended that the proposal for filling of crude oil be deferred keeping in mind the emerging trends in oil markets.'' Sources said the trimming of the equity infusion and deferment of crude oil filing may be linked to the government prioritising spending in a bid to try to limit its fiscal deficit to 5.9 per cent of GDP this fiscal year ending March 31.