New Delhi: Opposing the present ad-hoc fuel subsidy sharing mechanism, state-run Oil and Natural Gas Corporation (ONGC) has said its profitability and cash flows will be seriously impacted if the government forces it to bear one-third of marketing companies' revenue loss on fuel sales. (Agencies)
Oil and gas producers like ONGC have to make good one-third of the revenues that retailers lose on selling diesel, domestic LPG and kerosene at government-controlled rates. ONGC gives discounts to IOC, BPCL and HPCL on crude oil it sells to them to make up for losses on fuel sales.
"The upstream companies' share of under-recoveries (revenue loss) has been increased from one-third (33.33 per cent) to 38.75 per cent for the year 2010-11 and 46.89 per cent for Q4 of FY-11," ONGC Chairman and Managing Director A K Hazarika wrote to Oil Secretary G C Chaturvedi.
Hazarika said ONGC should get a net crude price of USD 58-60 per barrel to meet its planned capital investments of Rs 30,000 crore and so, the upstream companies' share should be just 25 per cent if crude oil prices rise above the USD 100 per barrel mark.
Upstream firms contributed Rs 30,297 crore out of the total revenue loss of Rs 78,189 crore in the 2010-11 fiscal. Of this, ONGC's share was Rs 24,892 crore. In a detailed 11-page note plus four annexures, Hazarika said ONGC's net price realisation will be USD 37.95 per barrel if one-third of the Rs 206,816 crore revenue loss arising at the USD 120 a barrel crude price is to be borne by upstream firms.
At a USD 100 per barrel crude price, the upstream share will be Rs 45,150 crore, of which ONGC will have to chip in Rs 37,096 crore and its net crude price realisation will be USD 46.26 per barrel.
Alternatively, he suggested that the government impose a special oil tax or windfall tax to take 20-80 per cent of incremental revenues accruing over and above the crude oil price of USD 60 per barrel. Hazarika said for every dollar hike in crude oil prices, the increase in under-recovery or revenue loss is Rs 3,440 crore. Of this, the upstream share is Rs 1,146.67 crore according to the one-third subsidy sharing formula.
New Delhi: Opposing the present ad-hoc fuel subsidy sharing mechanism, state-run Oil and Natural Gas Corporation (ONGC) has said its profitability and cash flows will be seriously impacted if the government forces it to bear one-third of marketing companies' revenue loss on fuel sales.