With global crude oil prices hovering at record high levels, India is staring at a ballooning of fuel subsidies up to Rs 53,000 crore in the current financial year ending March 2019. State-owned Oil and Natural Gas Corp (ONGC) and Oil India (OIL) may have to bear a large part of the burden impacting their financials, according to Moody’s Investors Service.
As the oil prices rise, ONGC and OIL face increasing risk that the government will once again require them to share in the country’s fuel-subsidy burden. “Because of the government’s widening fiscal deficit, ONGC and OIL could be asked to bear part of the Indian government’s fuel subsidy for oil, if prices stay above $60 per barrel for the fiscal year ending March 2019,” said Vikas Halan, Senior Vice President at Moody’s.
The two companies have not contributed to fuel subsidies since June 2015 but have paid for over 40 per cent of the country’s annual subsidy bill in previous years. Halan said the net impact of the subsidy sharing will be manageable for ONGC and OIL, even if they are required to bear the entire shortfall between budgeted and actual amounts for 2018-19. Read More
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