For this year, under-recoveries for oil marketing companies (OMCs) have been projected at Rs 163,000 crore. For Q3, three OMCs are expected to report under-recoveries of Rs 41,000 crore.
So far, the government has only provided compensation, which the company still have not got in the form of cash of Rs 30,000 crore, upstream for the first half have provided Rs 30,000 crore, reports CNBC-TV18’s Nayantara Rai.
The government and the cabinet will be trying for a diesel price hike, but decisions on these issues have more to do with political scenarios than with economic situation. There is no chance to hike prices by Rs 10; it will probably just be an incremental one.
Meanwhile, the Rs 2,500 crore of OFS issue of Oil India is expected to hit the market any day after January 15. According to oil ministry sources, the last leg of the Oil India roadshow in the US will conclude by January 11, adding investors have raised concerns of the government increasing Oil India's subsidy burden post divesting its 10% stake in the company.
The oil ministry has been skeptical of divestment since the ONGC debacle, but with the success of the NMDC OFS issue, it is confident the Oil India divestment will attract foreign and domestic investors. Though they concede the Oil India issue has to be priced at a discount for it to be a success.
So, the timing to hike price is quite good because the Gujarat and Himachal Pradesh (HP) elections are behind the government now. There is no parliament session in place, which is also one of the times when the government does not like to hike prices. So, it does have a narrow window to raise prices before the Budget session of parliament begins.
The ONGC disinvestment debacle must have been an important lesson for the government. It could be one of the factors that it might want to raise for Oil India, but more than Oil India and Rs 2,000 crore OFS issue, it is perhaps going to be impact the fiscal deficit, which will be on the top of the finance minister’s mind. A tough target of 5.1 percent is not possible when the government is talking about oil subsidies like this.