The Hindu Business Line : ONGC seeks exemption from subsidy sharing; offers to pay more revenues

OIL and Natural Gas Corporation (ONGC) has offered to pay more revenues to the Government, in the form of a higher dividend payment, in case it is spared from the subsidy sharing policy. The company has been demanding a fair deal in the mechanism of sharing under recoveries of the oil marketing companies in domestic liquefied petroleum gas and kerosene for sale under the public distribution system worked out by the Government.

In a recent communication to the Petroleum Ministry, the company said that if spared from the subsidy burden it could pay more dividend to the Government because the subsidy was eating into its profits. In 2003-04, the company paid a dividend of Rs 3,422.2 crore and Rs 5,703.7 crore in 2004-05. The total dividend paid by the petroleum sector to the Central and State Exchequer was Rs 7,641 crore in 2004-05.

The company has been stating that it should not be penalised for making profit. The oil major has also conveyed the concerns raised by its investors and stakeholders on subsidy sharing. ONGC sources said that the company has been receiving letters from the investors voicing their concern. In fact, one of the minority stakeholders, Kotak Securities Ltd, has raised objections to the formula, stating that it was `unwarranted siphoning of the profits.'

This is not the first time that the company has written to the Ministry. In the decision on subsidy sharing, the formula should be based on the principle of equity and rational rather than ad-hoc decision keeping in view only the temporary high profit of the company. The profits are high, on temporary basis, due to unexpected spurt in crude prices.

According to Government estimates, the upstream companies will have to bear a total of Rs 14,000 crore of the Rs 40,169-crore of under recoveries estimated to be incurred during the current fiscal. Under the new formula, ONGC's share of the subsidy burden shall be close to Rs 12,320 crore. Indications are that the Government may ask ONGC to give special dividend, which will not make up for under recoveries, but to cover part of the Rs 6,000-crore shortfall in the Centre's revenue from the petroleum sector.

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