(FE)
The government has dropped a plan to ask ONGC to resume sharing its fuel subsidy burden if the Indian basket of crude breaches $70 a barrel. An imminent reintroduction of the practice that was discontinued in FY16 was threatening to hit the state-run hydrocarbon producer’s all-important capex plans, especially since its surplus cash had got depleted by Rs 12,000 crore due to its Rs 37,000 crore acquisition of Hindustan Petroleum Corporation (HPCL) last last fiscal under a government directive.
An ONGC official told FE, “We have stated our position (that ONGC is not in a position to share the subsidy burden) and the government has understood it.” The petroleum ministry had reportedly planned to reap a ‘windfall’ by telling ONGC and Oil India, another state-run firm, to pay a tax, probably in the form of a cess, that kicks in the moment oil prices cross $70. The Indian basket of crude oil averaged $73.47 per barrel in July 2018 and was at $69.79 per barrel on August 17, 2018. ONGC is also seeking a waiver from the twin obligations of buying back its own shares and issuing bonus shares in the current fiscal.
A zero-debt company till FY17, ONGC borrowed about Rs 25,000 crore in March 2018 to fund the purchase of 51% in HPCL while it also dipped into its reserves and surplus. After the transaction, ONGC’s surplus cash depleted to a little over Rs 1,000 crore at FY18-end from over Rs 9,500 crore at FY17-end.
