ONGC, IOC, Other Oil PSUs To Invest Rs 1.2 Lakh Crore In FY25

ONGC, IOC and other oil PSUs will invest about Rs 1.2 lakh crore in the coming fiscal starting Apr. 1 in oil and gas exploration, refineries, petrochemicals and laying pipelines to meet the needs of the world's fastest-growing energy consuming nation.

The investment proposed in 2024-25 is 5% higher than Rs 1.12 lakh crore spent by the state-owned oil firms in the current fiscal year that ends on Mar. 31, according to Budget 2024-25 documents.

Oil and Natural Gas Corp has a planned capital spending of Rs 30,800 crore in the next financial year. This expenditure in finding new reserves of oil and gas and bringing to production discoveries it has already made, is slightly higher than Rs 30,500 crore capex in 2023-24 fiscal (Apr. 2023 to Mar. 2024). It is developing discoveries on both east and west coasts of the country.

The top oil producer's overseas arm, ONGC Videsh Ltd will invest 68% more at Rs 5,580 crore in 2024-25 in oil and gas operations abroad when compared with the previous fiscal.

Indian Oil Corp, the country's top oil refiner, will be the top spender with an investment outlay of Rs 30,910 crore, with the bulk of it in expansion and upgrade of its seven refineries that produce fuel. This outlay also includes Rs 3,299 crore in the petrochemical business and another Rs 236.48 crore in the small oil and gas exploration portfolio it has.

The investment planned by IOC is less than Rs 31,254 crore spending in the current 2023-24 fiscal.

Bharat Petroleum Corp Ltd has proposed a 30% higher capital spending at Rs 13,000 crore, two-thirds of which will be in its core refining business.

Gas utility GAIL India Ltd will see its planned investment decline to over Rs 8,000 crore in 2024-25 from Rs 9,750 crore in the previous fiscal as most of its pipeline grid expansion projects are nearing completion.

Hindustan Petroleum Corp Ltd, a subsidiary of ONGC, will invest Rs 12,500 crore in FY25, marginally higher than Rs 12,000 crore in the previous year.

Oil India Ltd, the nation's second-largest oil producer, will invest Rs 6,880 crore next year as compared to Rs 5,648 crore in the current fiscal.

In her interim budget for 2024-25 ahead of general elections, Finance Minister Nirmala Sitharaman had on Feb. 1 put off capital support to oil marketing companies - IOC, BPCL and HPCL to the next fiscal year.

She while presenting the annual Budget for 2023-24 on Feb.1 last year announced equity infusion of Rs 30,000 crore in IOC, BPCL and HPCL to support their energy transition plans. Alongside, she had also proposed Rs 5,000 crore for buying crude oil to fill strategic underground storages at Mangalore in Karnataka and Visakhapatnam in Andhra Pradesh that India has built to guard against any supply disruptions.

In November last year, the finance ministry halved the equity support and the documents of the interim budget for 2024-25 Sitharaman presented in Lok Sabha on Thursday showed no allocation for equity infusion in the current fiscal. The Rs 15,000 crore has now been earmarked for 2024-25 fiscal (April 2024 to March 2025).

The budget documents did not provide any funds either in the current fiscal or the next for filling the strategic reserves.

While other state-owned oil companies such as ONGC and GAIL (India) Ltd too have lined up billions of dollars of investment to achieve net zero carbon emissions, the equity support was limited to the three fuel retailers, who had suffered huge losses in 2022 when they held retail petrol, diesel and cooking gas prices despite a spike in raw material (crude oil) prices following Russia's invasion of Ukraine.

Industry sources said the decision may be linked to a boost in profitability of the three firms in the current fiscal which has partly covered for the losses in the previous 2022-23 (April 2022 to March 2023) fiscal. The three are making good profit this year as the freeze in retail selling prices extends into the 21st month despite crude oil prices having softened.

The board of IOC and BPCL had last year approved rights issues to raise up to Rs 22,000 crore and Rs 18,000 crore, respectively. The government was to participate in the rights issue.

Sources said the two firms plan to halve the rights issue.

In case of HPCL, the government will not make any direct equity infusion as it had sold its majority stake in the company to ONGC in 2018. The infusion is likely to be through ONGC which will make the preferential issue of shares to the government.

BPCL and HPCL are aiming to end net carbon emission from their operations by 2040 and IOC is aiming for 2046 for the same.

The trimming of the equity infusion and no allocation for crude oil filing may be linked to the government prioritising spending in a bid to try to limit its fiscal deficit to 5.8% of GDP this fiscal year ending Mar. 31.