With global crude prices witnessing major fluctuations since the past six months, the Government is in wait and watch mode and will take a call on the subsidy sharing formula with ONGC and Oil India ltd (OIl) for the forthcoming financial year only after they stabilise. In such a scenario, sources privy to the development have indicated that the much awaited ONGC disinvestment may take place only around the end of the first quarter of 2015-2016.
They informed that the current trend in global crude prices (which are currently hovering in the range of $50 to $55 per barrel) is likely to continue for at least another three to four months, and, therefore, any decision on subsidy sharing formula may be taken only around July or August 2015.
Though global investors had shown a lot of curiosity about the quantum of subsidy which ONGC will have to shoulder (when road shows were held abroad in November 2014 for the company's disinvestment) during the current fiscal, Finance Ministry sources told The Pioneer that any call on the matter will now be taken only once the international crude prices settle down to a set pattern. As a result of this, ONGC's disinvestment is clearly now on the back burner and any call on it will now be taken once the subsidy sharing formula is finalised.
Petroleum Ministry has been quite concerned over the lack of any direction from the Finance Ministry on the subsidy sharing issue, as it has held back ONGC's disinvestment. Now with North Block indicating that a decision on the issue will depend, provided the international crude prices showing some stability during the next few months, the reason behind the delay in taking a final call on the subsidy mechanism has become clear.
Sources further said that the incessant fall in crude prices over the past six months now has been a result of a price war tussle between Saudi Arabia and the US (whose shale gas has given a run for the money to the conventional petroleum products).
With Saudi Arabia refusing to stop the fall in crude prices, sources pointed out that it is being deliberating done by the Gulf nation to make US' shale prices non-competitive in the market. This has led to the free-fall in international crude prices, and have also now led to economic slowdown in many Middle-east nations.
This newspaper had reported on March 11 that there is also lack of clarity over whether ONGC will be asked to shoulder the under-recovery burden of the Centre for the fourth quarter of the current fiscal or not. Though the amount for the fourth quarter comes to around Rs 5,000 crore, sources indicated that the Government may not ask ONGC to pay for the quarter, yet adding at the same time that there could be a last minute missive from the Finance Ministry asking the Maharatna company to shoulder the Centre's burden, as happened in the third quarter of the current fiscal, when it had to shell out around Rs 9,000 crore as under-recovery payment.
Government had planned to offload 5 per cent of its stake in ONGC, an exercise through which it was looking to pocket around Rs 18,000 crore. Till now during this fiscal, the Government has managed to garner only around Rs 24,400 crore through stake sales in Coal India ltd (CIl) and SAIl. The disinvestment department is hard pressed for time to meet the FY15 disinvestment target of Rs 43,425 crore.