State-owned Oil PSUs to invest INR 1.2 lakh crore in FY25

The investment proposed in 2024-25 is 5% higher than INR 1.12 lakh crore spent by the state-owned oil firms in the current fiscal year

February 5, 2024

ONGC leads in planned capital spending with INR 30,800 crore, emphasising oil and gas exploration to enhance reserves on both the east and west coasts

Indian Oil Corp (IOC) will allocate INR 30,910 crore, primarily directed towards expanding and upgrading its seven refineries, with additional investments in petrochemicals and small exploration projects

Bharat Petroleum Corp Ltd (BPCL) proposes a 30% increase in capital spending at INR 13,000 crore, with a major share directed to core refining operations

Finance Minister Sitharaman deferred capital support, trimming equity infusion and shifting allocations, possibly linked to improved profitability and a focus on fiscal deficit constraints

Oil and Natural Gas Corp (ONGC), Indian Oil Corp (IOC), and other state-owned oil PSUs are set to invest approximately INR 1.2 lakh crore in the upcoming fiscal year starting April 1. This investment will be directed towards oil and gas exploration, refineries, petrochemicals, and pipeline development to cater to the escalating energy demands of the rapidly growing nation. Budget documents for 2024-25 indicate a 5% increase in investment compared to the INR 1.12 lakh crore spent in the current fiscal year ending on March 31.

ONGC plans to spend INR 30,800 crore in the next financial year, slightly higher than the INR 30,500 crore in the current fiscal year. ONGC Videsh Ltd (OVL), the overseas arm, is poised to invest 68% more at INR 5,580 crore in 2024-25 for international oil and gas operations.

IOC, the leading oil refiner, will be the top spender with an investment outlay of INR 30,910 crore, primarily for expanding and upgrading its seven refineries. This includes INR 3,299 crore in the petrochemical business and an additional INR 236.48 crore in small oil and gas exploration projects. Despite being lower than the current fiscal year’s spending of INR 31,254 crore, IOC maintains a substantial investment plan.

Bharat Petroleum Corp Ltd (BPCL) proposes a 30% increase in capital spending at INR 13,000 crore, with two-thirds allocated to its core refining business. GAIL India Ltd’s planned investment declines to over INR 8,000 crore in 2024-25 from INR 9,750 crore in the previous fiscal, as most pipeline grid expansion projects are near completion.

Hindustan Petroleum Corp Ltd (HPCL), a subsidiary of ONGC, plans to invest INR 12,500 crore in FY25, slightly higher than the INR 12,000 crore in the previous year. Oil India Ltd, the second-largest oil producer in the country, aims to invest INR 6,880 crore next year compared to INR 5,648 crore in the current fiscal year.

Finance Minister Nirmala Sitharaman, in her interim budget for 2024-25, deferred capital support to oil marketing companies – IOC, BPCL, and HPCL – to the next fiscal year. The profitability may influence the decision to postpone the equity infusion boost these companies have experienced in the current fiscal year, partially offsetting losses incurred in the previous fiscal year.

While ONGC and GAIL (India) Ltd have substantial investments to achieve net-zero carbon emissions, the equity support was limited to the three fuel retailers. This decision is likely connected to the improved profitability of these firms in the current fiscal year despite the freeze in retail prices continuing for 21 months.

The budget documents also reveal a shift in the allocation of INR 15,000 crore earmarked for equity infusion from the current fiscal year to the 2024-25 fiscal year. Notably, there is no fund provision in either fiscal year for filling strategic reserves.

The decision to trim equity infusion and forgo the allocation for crude oil filling may be attributed to the government’s focus on spending priorities, aiming to limit the fiscal deficit to 5.8% of GDP in the current fiscal year ending March 31.

Source: Economic Times

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