Upstream Companies might have to shell out larger portion to compensate oil firms who sell petroleum products at government rates
Burgeoning under-recoveries or loss on sale of petroleum products has become a bigger worry for upstream companies than oil marketers. In FY13 oil explorers including GAIL, Oil India and ONGC together shared subsidy burden of Rs 60,000 crore.
Independent analysts SP Tulsian has recently told CNBC-TV18 that upstream companies may have to shell out a larger portion in FY14 as under-recoveries will be higher on constantly weakening rupee.
Currently, the government and upstream companies each pay 37.5 percent of the total under-recoveries to oil firms like Hindustan Petroleum, Bharat Petroleum and Indian Oil Corp.
However, expressing concern over growing share of under-recoveries, Sudhir Vasudeva, chairman and managing director, ONGC told Business Standard that he is worried about the constant change in subsidy share formulae.
He further said that his firms share has started increasing and is almost inching toward 40 percent “In the past seven years, the government's total under-recovery is to the tune of around Rs 700,000 crore. Out of that, Rs 2,16,000 crore has been given by ONGC, he told the newspaper.
It may be noted that two years ago, upstream firms paid 33 percent to oil firms toward their share and from FY12 and currently their share has gone up to 37.5 percent.