Govt Slashes Support To Oil Firms, Postpones Filling Strategic Oil Reserves

According to the finance ministry, the government has reduced the equity injection in public sector oil retailers by 50 per cent to Rs 15,000 crore to back their energy transition projects. 

Last year on 1 February, Finance Minister Nirmala Sitharaman presented the annual Budget for the fiscal year 2023-24 (from April 2023 to March 2024) and declared equity injection of Rs 30,000 crore in Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) to assist the three public sector firms' energy transition plans. 

She also suggested Rs 5,000 crore for acquiring crude oil to fill strategic underground reserves at Mangalore in Karnataka and Visakhapatnam in Andhra Pradesh that India has constructed to protect against any supply disruptions. That plan has also been postponed due to emerging trends in oil markets, the finance ministry stated. 

While other public sector oil companies such as Oil and Natural Gas Corporation (ONGC) and GAIL (India) have also planned to invest billions of dollars to achieve net zero carbon emissions, the equity assistance was restricted to the three oil retailers, who faced huge losses in 2022 when they maintained retail petrol, diesel and cooking gas (LPG) prices despite a surge in raw material (crude oil) prices after Russia's invasion of Ukraine. 

The finance ministry posted on X about the outcome of the budget announcements and reported about the reduction of equity assistance and postponement of filling strategic reserves. 

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

Out of this, Rs 30,000 crore was for capital assistance to oil marketing companies IOC, BPCL and HPCL for green energy and net zero initiatives and the rest for buying crude oil for caverns at Mangalore and Visakhapatnam, it mentioned. 

"During the Expenditure Finance Committee meeting held on 30 November 2023, it was decided a maximum of Rs 15,000 crore could be provided for equity injection into OMCs in FY 2023-24," the finance ministry said without explaining the reasons for the decision.