As the government strives to keep fiscal deficit under control amid high global oil prices, it continues with its policy of milking its cash cows in the oil sector— ONGC, GAIL and Oil India Ltd (OIL).
In a move that will cast an impact on the forthcoming public offering (FPO) of ONGC in July this year, the government has decided to increase the contribution of upstream oil companies—ONGC, GAIL and OIL-—towards meeting the fuel subsidy burden to 38.8% for the fiscal year 2010-11.
Government sources said that out of the Rs78,159.0 crore revenues that state-owned fuel retailers (Indian Oil, Hindustan Petroleum and Bharat Petroleum) lost on selling diesel, cooking gas (LPG) and kerosene below cost in the 2010-11 fiscal, upstream firms ONGC, Oil India
and GAIL India have been ordered to contribute Rs30,296.7 crore, or 38.8%.
Traditionally, upstream companies contributed roughly one-third (33%) of the revenues lost on fuel sales through discounts on crude oil and products they sold to IOC, BPCL and HPCL.
However, on Thursday, the petroleum ministry issued orders raising the upstream contribution to 38.5%.
“ONGC has been ordered to chip in Rs24,892.4 crore, while OIL will provide Rs3,293.0 crore and GAIL Rs2,111.24 crore,” an official said.ONGC, which had in the first three quarters of the 2010-11 fiscal provided Rs12,757.0 crore in subsidy, has already seen its stock price plummet by 11% in anticipation of an increase in its share of subsidy.
The government had planned to sell 5% of its shares in ONGC in a follow-on public offering (FPO) in July to raise Rs12,000.0 crore, but at the current price, it may get just over Rs10,000.0 crore.
Sources said the share of the upstream firms was increased as the finance ministry provided only Rs20,001.0 crore in the second installment of the cash subsidy as against the demand of Rs26,000.0 crore.