Subsidy burden in FY14 will not be worse than FY13: ONGC

Though there seems to be very less chances of a one-time bulk diesel price hike, Sudhir Vasudeva, Chairman, ONGC, hopes that atleast the 50 paise increase per month would continue. The reason for worry was under-recoveries were increasing, thereby increasing the subsidy burden, he says.

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He hopes that the subsidy burden won't be worse than last year's. If the rupee trades at around 62 per dollar and the oil price is about USD 110 per barrel then the subsidy burden would be something like Rs 159,000 crore, which is just about the same as last year at Rs 1,61,029 crore, he says. With the geopolitical situation, which was developing in Syria, easing and the rupee almost stabilising, the subsidy burden will most probably be under control, he adds.

Below is the verbatim transcript of Sudhir Vasudeva's interview on CNBC-TV18

Q: Things are a bit bleak as far as the fuel subsidy issue is concerned, are you still hopeful that one time diesel hike will come or even that 50 paisa a month will continue?

A: If we see honourable minister’s statement yesterday, at present there is no proposal for increasing price of liquefied petroleum gas (LPG) or diesel but whatever the decision taken in January, that means increase of price of 50 paisa per month would continue. Let us hope at least that continues. The reason for worry was that the under-recovery on diesel was increasing and with that the burden of subsidy was increasing.

Q: If you factor in this 50 paisa per month not even per fortnight but per month and current rates of dollar and crude, are you likely you will end up with a higher subsidy burden than even last year, what is the extrapolation now in terms of your subsidy burden?

A: Again quoting from the minister’s statement, what is projected now is that in case the dollar has about 62/USD and the oil price is about USD 110/barrel then the subsidy burden would be something like Rs 159,000 crore which is just about the same as last year which was Rs 1,61,029 crore. So I am very optimistic that the subsidy burden would not be worse than what it was last year.

Q: But in the extreme case of state elections becoming more important than the government’s fiscal situation, things could get worse, is it?

A: No, first of all there were two reasons for the subsidy burden increasing. One was that oil prices were going north because of this geopolitical situation, which was developing in Syria and the second one was the rupee nose-diving. Fortunately, both the things are now under control. So hopefully if the situations are stable, subsidy burden also should be under control.

Q: What about net realisations in Q1, you got about USD 40 or so, now with the government being non-committal on subsidy sharing, what level do you think the subsidies could continue at in the near-term?

A: That is true that we got USD 40.17 in Q1. Last year we have got overall for the year USD 47.85 and add to that in last four-five years, we have been getting in the range of about USD 55. In terms of absolute numbers again, Q1 we paid Rs 12,622 crore. So we are only thinking that probably our burden would remain at last year’s level which was about Rs 49,000-50,000 crore.