State-Run Refiners Face Financial Crisis Amid Soaring Losses

Strategic Insights -

State-run refiners Indian Oil Corp, Hindustan Petroleum, and Bharat Petroleum are facing mounting losses from the sale of diesel and cooking fuel, threatening to ruin their finances and impose a heavy subsidy burden on ONGC. The three companies reported a combined loss of ₹9,360 crore in the first quarter and fear another quarter of losses or a marginal profit. The government is considering a proposal to ask oil marketing companies to bear at least 10% of the estimated ₹121,000 crore revenue loss from selling diesel, cooking gas, and kerosene at controlled rates.

Key Takeaways:

  • State-run refiners Indian Oil Corp, Hindustan Petroleum, and Bharat Petroleum reported a combined loss of ₹9,360 crore in the first quarter.
  • The companies face another quarter of losses or a marginal profit, with revenue loss from selling diesel, cooking gas, and kerosene estimated to soar to a record ₹121,000 crore in the current financial year.
  • The government is considering a proposal to ask oil marketing companies to bear at least 10% of the subsidy burden, which would raise the combined subsidy burden of ONGC, Oil India, and Gail by nearly 90%.
  • The move would force the government to defer ONGC's follow-on public issue for the next fiscal, as it contributes over 90% of upstream discounts.
  • IOC, BPCL, and HPCL have pleaded the government to exempt them from sharing any subsidy burden.
  • The oil ministry had persuaded the finance ministry to totally insulate the companies from the subsidy burden in 2008-9 when the subsidy bill crossed ₹100,000 crore marks.

Statistics:

  • ₹9,360 crore: Combined loss of Indian Oil Corp, Hindustan Petroleum, and Bharat Petroleum in the first quarter.
  • ₹121,000 crore: Revenue loss from selling diesel, cooking gas, and kerosene at controlled rates estimated for the current financial year.
  • 10%: Proposed percentage of subsidy burden that oil marketing companies may be asked to bear.
  • 90%: Proposed increase in combined subsidy burden of ONGC, Oil India, and Gail due to the proposed move.
  • ₹100,000 crore: Subsidy bill that was crossed in 2008-9.

Sources:

  • "Mounting losses from sale of diesel and cooking fuel and uncertainty over government support threatens to ruin the finances of top state-run refiners and impose a heavy subsidy burden on ONGC," by Rajeev Jayaswal, New Delhi (Source: UNSPECIFIED News Agency)
  • Two government officials with direct knowledge of the matter said the government is considering a proposal to ask oil marketing companies to bear at least 10% of the subsidy burden. (Source: UNSPECIFIED News Agency)
  • An executive at one of the oil marketing firms said the companies are expected to post poor results even in the second quarter. (Source: UNSPECIFIED News Agency)
  • A top official in a state-run refining company said the companies were not in a position to match subsidy contributions they paid in the previous financial year. (Source: UNSPECIFIED News Agency)