Oil Transition Support to be Halved in India by FY24

5 Jan 2024 , 02:46 AM

According to news reports, India intends to reduce equity investment to $1.8 billion for 2023–2024 in order to support the green energy projects of three state oil refiners. This move comes as the federal government looks to reduce its fiscal deficit.

The third-largest economy in Asia is prioritising expenditure in an effort to keep its fiscal deficit to 5.9% of GDP for the current fiscal year, which ends in March. The economy is facing a 40% shortfall in revenue collection from stake sales in state-run firms.

Indian Oil Corp. has set a goal for 2046, while state-run Bharat Petroleum Corp. and Hindustan Petroleum Corp. want to cease producing net carbon emissions from their activities by 2040.

The budget for this fiscal year included an announcement of 300 billion rupees ($3.61 billion) in equity support to assist the enterprises in meeting their targets.

However, a representative from the sector and the government stated to ET that the funds will be disbursed gradually and that the government will pay 150 billion rupees in equity support in 2023–2024.

According to one of the reports, the government has reduced the amount because the refiners’ financial standing is strong and they do not need 300 billion rupees for capital expenditures this year.

As the federal cabinet has not yet approved the details, all of the persons with firsthand knowledge of the situation spoke under anonymity.

BPCL and IOC are expected to reduce the size of their planned rights offerings by half, to 90 billion and 110 billion rupees, respectively, according to two industry sources.

According to one reports, refiners would not require funding for energy transition projects right away, and their capital expenditures won’t rise dramatically for another two to three years.

According to a second government source who talked to Reuters, Oil and Natural Gas Corp., HPCL’s parent company, will increase the government’s ownership position in the company by 1% to 1.5% by issuing preferential shares.

The government’s intention to reduce its equity interest by half, the size of the planned rights offer by BPCL and IOC, and the preferential issue by ONGC have not been previously disclosed.

Since the government sold ONGC its whole 51.1% ownership in HPCL in 2018, the government is unable to directly support the corporation.

The government has taken into consideration a number of funding possibilities for HPCL, including an ONGC rights issue.

According to two industry insiders who talked to Reuters, in order for the government to finish the procedure before the start of the next fiscal year on April 1, oil companies must launch rights and preferential issues by mid-March.

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