Business | Oil & Gas
India's ONGC sees 70% increase in subsidy cost
India's top oil explorer, Oil and Natural Gas Corp (ONGC), expects to pay nearly $9 billion to fund subsidies for cheap fuel this fiscal year, up 70 per cent, despite recent price hikes, its chief said on Sunday.
- Reuters
- Published: 23:39 June 8, 2008
Kuala Lumpur: India's top oil explorer, Oil and Natural Gas Corp (ONGC), expects to pay nearly $9 billion to fund subsidies for cheap fuel this fiscal year, up 70 per cent, despite recent price hikes, its chief said on Sunday.
R.S. Sharma, chairman and managing director, also told Reuters that the company, which runs one refinery, was keeping a freeze on plans to build over 1,500 domestic petrol stations to focus its $15-$20 billion warchest on upstream expansion, even after the government's 10 per cent price rise last week.
"Sensing a scenario of high under-recoveries and selling at a loss we have decided to put this retail business on the backburner," he said, referring to ONGC's plans to build 1,100 retail stations nationwide along with 500 planned by MRPL.
"But more and more my focus is on exploration and production, to redevelop and develop existing fields in and outside India...acquiring equity oil," Sharma said ahead of the Asia Oil and Gas Conference (AOGC) in the Malaysian capital.
ONGC is working on three to four upstream oil and gas projects in the Middle East, the west coast of Africa and South America, he said, without giving details.
The current capital expenditure for overseas upstream investments is Rs80 billion, while domestic expenditure for E&P is Rs180 billion.
ONGC and other upstream oil producers are forced to fund about a third of the cost of fuel price subsidies in Asia's third-largest oil consumer.
It will pay out Rs380 billion ($8.91 billion) in the current fiscal year to April, up from Rs220 billion in fiscal 2007-08, Sharma said.
ONGC is the latest firm to get cold feet on India's retail oil sector, where fuel prices are kept artificially low and subsidies paid only to state-owned marketing firms.
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