The government has halved the amount of capital support given to state-owned oil marketing companies. The support was officially aimed at beefing up investments in energy transition projects, but government officials had indicated that the provision had been made to compensate three fuel retailers who had suffered huge losses in 2022 when they held retail petrol and diesel prices despite a spike in crude oil prices following Russia’s invasion of Ukraine.

The Union Budget for FY24 made a provision of ₹30,000 crore of capital support to Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd. (BPCL), and Hindustan Petroleum Corporation Ltd. (HPCL). Also, the Finance Minister had proposed ₹5,000 crore for buying crude oil to fill strategic underground storages at Mangaluru in Karnataka and Visakhapatnam in Andhra Pradesh.

The Finance Ministry on Friday informed that the equity support has been halved to ₹15,000 crore and the plan for filling strategic reserves has been deferred.

“During the Expenditure Finance Committee meeting held on November 30, 2023, it was decided that a maximum of ₹15,000 crore could be provided for equity infusion into OMCs in FY24,” the Finance Ministry said on X, giving details about delivery on budget promises.

Strong performance

“Based on the recommendations of the EFC, approval of the CCEA (Cabinet Committee on Economic Affairs) is being sought,” the Ministry said, while adding that the draft note for approval of the CCEA is under process. Although the social media post did not give any reasons for cutting support, it is believed that the strong performance of OMCs prompted the government to slash the equity infusion.

On July 7 last year, the Indian Oil Board approved raising up to ₹22,000 crore via right issue, which is likely to be utilised among other things for its green energy initiatives. Earlier, on June 28, Bharat Petroleum Corporation said that its board had approved a rights issue for raising up to ₹18,000 crore. On June 22, the CPSU said the exercise was being undertaken to achieve energy transition, net zero, and energy security objectives. Since HPCL has been taken over by ONGC, which means government will infuse capital later, which will in turn put the money into HPCL. Now, all four companies will have to complete the formalities of the revised capital infusion plan by March 31, 2024.