Govt Plans To Infuse Equity In Three Oil Marketing Companies After Capital Support: Report

However, the oil marketing companies are concerned that equity infusion might impact their share price, market valuation, and market perception

The government is considering an equity infusion and possible stake increase in oil marketing companies (OMCs) after they submit their capital investment plans, reported the Economic Times. The report citing government officials said that the Centre has set aside Rs 30,000 crore in capital support for three state-run oil companies, namely Indian Oil Corporation, Bharat Petroleum Corporation, and Hindustan Petroleum Corporation. However, the instruments through which equity will be infused have not been finalised.

The report also said that the capital support will come with an emphasize on projects linked to refinery upgradation, emission reduction, and similar activities. However, the companies are concerned that equity infusion might impact their share price, market valuation, and market perception.

In the Budget 2023-24, Finance Minister Nirmala Sitharaman allocated Rs 30,000 crore for capital support to state-run oil marketing companies (OMCs). This was on the backdrop of losses booked by these companies in the first half of the financial year 2022-23.

The oil marketers had suffered cumulative losses of Rs 27,276 crore in the first half of FY23 due to selling liquified petroleum gas (LPG) and other cooking gases below the cost price., according to a ministry release. These companies provide over 90 per cent of India's total petroleum demand.

However, an official for one of the OMCs told ET, "We are not in a very good financial situation right now. We were expecting some financial help from the government. But so far nothing has come." 

Earlier this year CNBC-TV18 had reported that state-run OMCs expect Rs 50,000 crore cash compensation from the government for the financial year 2023-24. The OMCs seek compensation on grounds of a freeze in retail prices of petrol and diesel in 2022 despite a steep rise in crude prices, the report stated. 

In October last year, the Centre approved a one-time grant of Rs 22,000 crore to OMCs to make up for the losses. 

At present, the Centre has a 51.5 per cent stake in Indian Oil Corporation (IOC). Similarly, in Bharat Petroleum Corporation Ltd (BPCL), the Centre holds a 52.98 per cent stake. As for HPCL, the state-owned Oil and Natural Gas Corporation (ONGC) owns 54.9 per cent of the company, with the rest being held by the public.