ONGC seeks more clarity on subsidy-sharing formula
14 September 2016
Oil and Natural Gas Corporation (ONGC) has sought clarifications from the government on the new subsidy sharing mechanism as it plans to expand its downstream business.
With the government already providing exemption from subsidy-sharing for this fiscal due to sharp fall in global crude prices, the state-run explorer has been asked to make a presentation to the oil ministry for a ceiling beyond which upstream producers should contribute towards the subsidy.
D K Sarraf, chairman and managing director of ONGC, said, ''We have already made a presentation to the oil ministry and have sought clarity on the subsidy sharing mechanism. Since crude oil prices are now low, we have been exempted. But once the price goes up, we will be asked to bear the bill again. We wanted to get clarity and fix a ceiling on the crude price.'' However, according to Indian Express sources, the explorer expects that if crude prices go beyond $60 per barrel, then subsidy upstream companies too will have to share subsidy.
''Our refining subsidiary, MRPL has achieved its highest throughput of 15.53 million metric tonnes with a strong gross refining margin of $5.2 per barrel. With low crude oil prices, our focus is now on increasing the retail footprint by opening 100 retail outlets and become a strong player in the southern part of the country,'' added Sarraf.
With the government deregulating the retail prices of petrol in June 2010 and that of diesel in October last year, there is now a level playing field, which facilitates the entry of private players in the country's fuel market.
At present, the top three state refiners control over 95 per cent of the market for petrol and diesel. Reliance Industries Limited (RIL) also plans to enter the market in a big way and has already started operations at around 1,050 fuel stations, out of a total of 1,400 outlets that it has across the country. The company is also learnt to be offering a discount of around Rs2 per litre of diesel at a few company-owned and company-operated (COCO) outlets.
The move will provide relief to exploration and production companies, which are grappling with squeezed margins because of low crude prices at present and are looking at other avenues to mobilise resources for more investments.
The country imported 202.1 million tonnes of crude oil in FY 16 compared to import of 189.4 million tonnes of crude oil for $112.7 billion in the FY15.