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Subsidy hurts ONGC

Calcutta, Nov. 22: Oil and Natural Gas Corporation Ltd (ONGC) expects the overall subsidy burden on petroleum products to reach Rs 1,40,000 crore in 2013-14, which is likely to inflate the subsidy bill of the upstream oil firm.

“The subsidy burden now is almost becoming backbreaking. This year’s burden (combined) could be around Rs 1,40,000 crore,” ONGC chairman and managing director Sudhir Vasudeva said.

He was speaking on the sidelines of a conference of the Institute of Chartered Accountants (ICAI) in the city.

The government had pegged the overall fuel subsidy burden at Rs 80,000 crore at the beginning of 2013-14 against Rs 1,61,029 crore in 2012-13, mostly through steps such as diesel price decontrol and the cap on subsidised LPG cylinders. However, analysts suggest that the weak rupee and rising crude prices can increase the burden,

“Ultimately, what is important is how much burden the government is looking to take. If the government passes everything to us, then what happens?” Vasudeva said.

Upstream oil producers such as ONGC and Oil India sell crude at a discount to refiners to cover for a part of their losses suffered for the sale of diesel and cooking fuel at lower rates than the cost of production.

ONGC’s subsidy burden in the first half of this fiscal already stands at Rs 23,400 crore. A higher subsidy will put more strain on the profitability of the country’s largest oil and gas exploration firm.

On the MoU between ONGC Videsh and Petrovietnam for the exploration of crude oil from five blocks in Vietnam, Vasudeva said, “Now the blocks have only been offered. Unless we see the blocks nothing can be said on the projected investment in these blocks.”

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