ONGC to lose Rs 10,000 cr in oil deficit maneouvring

Protesting against the ceiling, ONGC has shot out a number of letters to the government saying the ceiling would hit its domestic investment plans badly, which in turn would impact the domestic availability of crude, sources said.

ONGC, expected to sell about 23.5 million tonnes of crude to national oil refineries during 2000-01, would be deprived of free market benefits, they said while pointing out that government had put the ceiling from January 2000 by freezing the prices at the monthly average import price level of November last year.

Union Cabinet had decided to accord import parity to the extent of 75 per cent in 1998-99, 77.5 per cent in 1999-2000 and 80 per cent during the current financial year as part of phased deregulation of domestic crude prices to give total import parity from April 2002.

When contacted ONGC’s finance director I N Chatterjee declined to comment on the issue saying he was preoccupied with the corporation’s AGM, being held on September 27.

Sources said the government had fixed the ceiling at Rs 570 per tonne of crude for domestic producers and it was working out to just 47 per cent of the import parity at the prevailing exchange rate.

When contacted Petroleum Ministry sources said ONGC was a beneficiary of the government’s protections during the first year of the implementation of price formula when it was being given about 14 dollars a barrel when the ruling international crude prices had plunged to 9-10 dollars a barrel.

When ONGC officials raised the issue with the government recently, petroleum secretary is believed to have told them that they would be compensated as per the price formula.

Ministry sources said the ceiling had become inevitable due to growing pressures on oil pool account in the face of hardening of international crude prices while domestic prices remained unchanged. Anyway, the corporation with reserves of about Rs 5,500 crore was in a position to sustain the pressure in the overall interests of the economy in general and oil pool in particular, they added.

ONGC officials, however, protested against this view saying that it had investment plans of about Rs 35,000 crore till 2005 and corporation should not be denied of the returns on its high risk investment in the exploration and production.

Despite the ceiling, the corporation is expected to post a net profit of about Rs 3,800 crore on a turnover of Rs 22,000 crore during current fiscal as against Rs 3,629 crore and Rs 20,093 crore respectively in 1999-2000.