Centre Plans To Ask ONGC To Consider Rights Issue To Fund HPCL: Report

In 2018, the central government sold its entire stake of 51.1 per cent in HPCL to ONGC, making the firm a subsidiary of India's top energy explorer

Finance Minister Nirmala Sitharaman announced a plan this year to provide equity of Rs 300 billion to help the big state oil refiners move towards cleaner energy. ( Image Source :Getty )

The Centre plans to ask Oil and Natural Gas Corp (ONGC) to consider launching a rights issue to help fund green projects at refining arm Hindustan Petroleum Corp, citing two sources privy to the development Reuters said. According to the report, this exercise could raise about $1.9 billion.

Finance Minister Nirmala Sitharaman announced a plan this year to provide equity of Rs 300 billion ($3.6 billion) to help the big state oil refiners move towards cleaner energy.

According to the sources, the government is weighing options for HPCL, including directly providing loans at preferential rates. The oil ministry is awaiting a response from the finance ministry on the plan for ONGC to launch a rights issue, one of the sources said. Based on rights issues previously announced by two other state refiners, an ONGC issue could amount to about Rs 155 billion ($1.86 billion), Reuters calculations show.

In 2018, the central government sold its entire stake of 51.1 per cent in HPCL to ONGC, making the firm a subsidiary of India's top energy explorer. The government holds a stake of 58.93 per cent in ONGC.

Initially, the government had planned to infuse funds into HPCL by allocation of preferential shares, but that risked pushing ONGC's stake below 50 per cent and ending the government's indirect control of HPCL, one of the sources said. ONGC, HPCL and the oil and finance ministries did not immediately respond to requests for comment.

The other big state refiners, Indian Oil Corp and Bharat Petroleum Corp have announced plans to launch rights issues of Rs 220 billion and Rs 180 billion, respectively.

The government has a 51.5 per cent stake in IOC and 52.98 per cent share in BPCL. However, a lack of clarity from the government over how to infuse funds into HPCL has delayed the launch of rights issues for IOC and BPCL, sources said. Those issues had earlier been planned by the end of October, sources have said.

Combined, the three refiners aim to invest Rs 3.5 trillion to 4 trillion to reach a goal of net-zero emissions by 2040.