The government has halved the amount of equity investment in state-owned fuel retailers to Rs 15,000 crore to support their investments in energy transition projects, the Finance Ministry has said.

Finance Minister Nirmala Sitharaman, while presenting the annual budget for the financial year 2023-24 (April 2023 to March 2024) on February 1 last year, announced equity infusion of Rs 30,000 crore in Indian Oil Corporation (IOC), Bharat Petroleum Corporation Limited (BPCL) and Investment was announced. Hindustan Petroleum Corporation Limited (HPCL) will support the energy transition plans of three state-owned companies.

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Along with this, he had also proposed Rs 5,000 crore to buy crude oil to fill strategic underground storages in Mangalore in Karnataka and Visakhapatnam in Andhra Pradesh, which India has created to protect against any supply disruption. The Finance Ministry said that plan has also been postponed in view of the emerging trends in the oil markets.

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

The Finance Ministry, in a post on Twitter detailing the consequences of the budget announcements, informed about halving of equity support and deferring filling of strategic reserves.

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

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

“During the meeting of the Expenditure Finance Committee held on November 30, 2023, it was decided to provide a maximum of Rs 15,000 crore for equity investment in OMCs in the financial year 2023-24,” the Finance Ministry said without giving details of the reasons for the decision. Can go.”

Industry sources said the decision could be linked to the increase in profitability of the three companies in the current financial year, which has partially covered the losses in the previous 2022-23 (April 2022 to March 2023) financial year.

All three are making good profits this year as stability in retail selling prices extended to the 21st month despite softening crude oil prices.

“Based on the recommendations of the EFC, CCEA (Cabinet Committee on Economic Affairs) approval is being sought. The draft note is under process in MOPNG (Ministry of Petroleum and Natural Gas) for CCEA approval, the ministry said.

The boards of IOC and BPCL had last year approved rights issues to raise up to Rs 22,000 crore and Rs 18,000 crore, respectively. The government had to participate in the rights issue.

Sources said both the companies are planning to halve the rights issue and complete it by March 31.

In the case of HPCL, the government will not make any direct equity investment as it had sold its majority stake in the company to ONGC in 2018. The investment is likely to be through ONGC which will make a preferential issue of shares to the government.

BPCL and HPCL are aiming to eliminate net carbon emissions from their operations by 2040 and IOC is targeting 2046 for the same.

On the plan to procure crude oil for strategic storage, the Finance Ministry said: “The Department of Expenditure, Ministry of Finance has recommended that the proposal to fill crude oil be postponed in view of the emerging trends in the oil markets. “

Sources said the cut in equity investments and delay in crude filings were linked to the government prioritizing spending in an effort to limit its fiscal deficit to 5.9 percent of GDP in this fiscal year ending March 31. May go.

This comes as the government is facing a shortfall in revenue collection, especially from stake sale or disinvestment in public sector undertakings.

(This story has not been edited by News18 staff and is published from a syndicated news agency feed – PTI)