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ONGC may get marketing freedom to sell its crude oil to whomsoever it wants to in the domestic market. This will help the company take advantage of soaring crude oil prices.
The public sector oil and gas explorer and producer has been pushing for freedom to sell its crude production to domestic consumers at market prices, instead of being bound by the Centre’s allocation system. A senior official told BusinessLine, “we have proposed that the government can collect royalties according to whatever formula they wish, but leave it to the company on whom to sell to. Seeing the trend of this government of taking reform initiatives in the sector we hopeful of the positive results.”
The Cabinet is expected to take a final decision on the proposal.
At present, the government allocates ONGC’s crude production to various Indian refineries. Abolishing the allocation system will not have a significantly adverse impact on the refiners as they anyway import about 85 per cent of their crude requirement, the official said.
Different prices
On the other hand, market freedom for its crude production would give ONGC the ability to price heavy and light crudes differently. “We get the same price for all our crude. But we strongly feel that certain crude like Bombay High can command premium over even Brent,” the official said.
“There are buyers for heavier crude like Reliance’s refinery or Indian Oil’s Panipat refinery. Those refineries which are not suited for heavy crude can buy lighter crude at the right price,” the official added.
ONGC’s share price has nearly doubled since November as international crude prices have bounced back after a Covid-induced nosedive. Brent crude on Monday crossed the $70-per-barrel mark for the first time since the coronavirus outbreak.
However, not being able to market its production freely among domestic buyers continues to hinder ONGC’s ability to rake in revenue during what would otherwise have been a lucrative period for the firm.
ONGC produced 20.63 million tonnes in the financial year ended March 2020. For the April-January period of the ongoing financial year, the firm’s crude production stood at 16.93 million tonnes.
Meanwhile, rising crude prices, combined with historically high taxes, have sent retail prices of petrol and diesel soaring across the country. Over the past 10 days, however, oil marketing companies have kept prices stable amidst elections in several States.
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