With the financial year 2014-15 coming to an end, the under-recovery losses for the current fiscal have been pegged at an estimated Rs 72,000 crore, which Government suffers on selling kerosene, lPG and diesel at less than market price. With State-owned upstream company ONGC having shouldered more than 50 per cent of the Government’s burden during the first three quarters, there is a likelihood that it may be asked to pay a miniscule amount for the fourth quarter or may even be spared from making any payments towards the subsidy burden.
Sources close to the development told The Pioneer that out of the estimated Rs 72,000 crore under-recovery losses for the entire FY15, around Rs 67,000 crore have been accounted for by the Government as well as ONGC till the first three quarters of FY15. In such a scenario therefore, there is a possibility that the Government may pay the remaining amount of Rs 5,000 crore on its own without burdening ONGC, they added.
While the Petroleum Ministry has indicated that ONGC may be spared from making the payment, sources informed that a final call may be taken after discussions with the Finance Ministry on the matter. Though the amount is not much, sources pointed out that it is mainly due to the volatility in global crude prices that ONGC may be spared from making the payment. Also because of the losses suffered by the company during its third quarter, the Government may go soft on it this time.
ONGC suffered an almost 50 per cent decline in its net profit during third quarter of the current fiscal as it was directed by the Government to share the burden of under-recoveries of the three oil marketing companies (OMCs) by giving them discount on crude oil. The company bore an impact of Rs 5,386 crore on its net profit for Q3 of the current fiscal, on account of the under-recovery discount it provided to the three OMCs. ONGC’s share of under recoveries of the three OMCs on account of giving them discount on crude oil stood at Rs 9,458 crore in the third quarter of FY15, from Rs 13,764 crore in the corresponding quarter of the previous year.
Going by what happened with ONGC’s financials in the third quarter of the current fiscal, sources said that everything will depend on Finance Ministry’s directive on whether the company will be spared from making the subsidy payment or may be asked to pay at the last moment. Meanwhile out of the Rs 67,000 crore under-recovery payout for the first three quarters of the current fiscal, ONGC was a major contributor as it paid Rs 36,300 crore, while GAIl had to shell out Rs 1,000 crore. Government on its part only paid Rs 22,000 crore towards the amount.
Even Petroleum Minister Dharmendra Pradhan earlier this week indicated that the Government is keen to protect state-owned from subsidy burden in the fourth quarter of FY15 as volatility in crude oil prices have taken a hit on its finances. Pradhan said his ministry was “in touch” with the Finance Ministry for compensation of losses to be incurred by state oil companies during January-March quarter.
“We are in touch with Finance Ministry for working out the subsidies sharing mechanism for fourth quarter,” he said earlier this week. The fall in international oil prices has meant that ONGC’s realisation has dipped and after paying for fuel subsidy, which is in form of discount on crude oil it sells to refiners, it is left with only few dollars per barrel that are hardly sufficient to meets its expenditure.