ONGC not ready to share fuel price burden, says it is already in the red
02 June 2018
The reported government move to pass on part of the burden of rising fuel prices from the consumer and downstream oil marketing companies to upstream oil producer Oil & Natural Gas Corporation (ONGC) is facing resistance as the state-run oil and gas explorer says it is already burdened by the buyout of Hindustan Petroleum Corporation and the bailout of Gujarat State Petroleum Corp in fiscal 2017-18.
With ONGC’s reluctance to shoulder the burden of a cut in diesel and petrol prices, the governments — both central and state — will now have to bear part of the burden through cuts in excise duty or state levies.
ONGC chairman Shashi Shanker conveyed the company’s position to petroleum minister Dharmendra Pradhan that the national explorer is “already in the red” after buying out Hindustan Petroleum Corp and bailing out Gujarat State Petroleum Corp in fiscal 2017-18.
ONGC with its acquisition of an 80-per cent stake in GSPC’s KG basin gas block for Rs7,738 crore and the purchase of the central government’s entire 51.11-per cent stake in oil refining and marketing company HPCL for Rs36,915 crore has ceased to be an upstream operator and is also an oil marketing company.
ONGC said it has to pay another $800 million to GSPC for the gas block once the field development plan for the cluster wells are submitted and approved.
“There is no scope for reduction (in prices). Only way out is to reduce the taxes or a burden on ONGC which is already in the red,” an official said.
The finance ministry is reluctant to cut the excise duty levied on petrol and diesel as it would lead to borrowing more to fund the social sector schemes. This would raise the country’s fiscal deficit and thus lower its credit rating.
While petrol and diesel prices have in the last two days have been cut by 8 paisa and 6 paisa, respectively, per litre, the government is unable to effect any visible reduction in prices.
The petroleum ministry was to direct ONGC to sell its crude oil at below ruling international prices by capping the price for the entire fiscal. ONGC supplies an estimated 20 per cent of the country’s total crude oil requirement.