The Oil & Natural Gas Corporation (ONGC) is reluctant to shoulder the burden of a cut in diesel and petrol prices and it seems more likely that the reduction will have to be effected through cuts in excise duty or state taxes.
At a meeting late Thursday at Petroleum Minister Dharmendra Pradhan’s residence, ONGC chairman Shashi Shanker conveyed that the national explorer was “already in the red” after buying out Hindustan Petroleum Corp and bailing out Gujarat State Petroleum Corp in fiscal 2017-18.
Last August, ONGC acquired 80 per cent stake in GSPC’s KG basin gas block for Rs 7,738 crore followed by purchase of the central government’s entire 51.11 per cent stake in oil refining and marketing company HPCL for Rs 36,915 crore.
The ONGC conveyed that it will have 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.
The Petroleum Ministry’s plan was to direct ONGC to sell its crude oil at below ruling international prices by capping the price for the entire fiscal year. Oil India Ltd, the other national oil producer, was not to be a part of this scheme.
ONGC supplies an estimated 20 per cent of the country’s total crude oil requirement to refining and marketing companies Indian Oil Corp, HPCL and Bharat Petroleum Corp. Incidentally, ONGC and OIL last contributed to fuel subsidies in June 2015 with contributions of over 40 per cent of the annual subsidy bill.
There was a 19-day freeze on revising rates before Karnataka went to polls. Fuel prices climbed significantly once the hiatus ended May 14, but have been inching down in the last three days.