MUMBAI: Despite a rollback of customs duty on imported gas or LNG and an extension of viability gap funding for various oil and gas installations, pipelines and LNG storage terminals, industry insiders see the Union Budget 2012 as lacklustre.
say they had expected complete deregulation of diesel, more freedom to revise petrol prices, abolition of excise duties and special duties prevailing on branded fuels. So, oil PSUs continue to be a worried lot, as they believe that the Budget did not do anything special for the sector that is reeling under one of its worst financial crisis, hit by a triple whammy of high crude prices, the government’s steadfast refusal to deregulate fuel prices and the obvious under-recoveries that are threatening to bankrupt oil PSUs.
The ongoing Iran crisis is the latest nail in the sector’s coffin as its diplomatic tensions with the US and EU have pushed up international crude prices to a record $120 a barrel, which in turn pushed up India’s average crude basket to $118. Not surprisingly, for the year ending March 31, 2012, the projected under-recoveries to be borne by oil PSUs is close to Rs 1,40,000 crores.
Thus, total losses on this account to be borne by the state refiners this fiscal is expected at Rs 1.32 trillion compared with Rs 78,190 crore last year, according to the petroleum ministry. In the nine months ended December, it stood at Rs 97,313 crore.
The overall impact gets grimmer when one takes a close look at the immediate scenario where OMC’s incur a loss of Rs 13.55 per litre of diesel, Rs 439 per LPG cylinder, Rs 29.97 per litre of kerosene and Rs 6 per litre of petrol. All of this totals up to a daily loss of Rs 465 crore for the OMCs.
A vicious cycle especially when India’s crude oil import bill for the first nine months of the current fiscal 2011-12 shot up by 49% to Rs 469,993 crore, so OMCs say they may witness a 50% jump in losses in FY12-13 due to selling subsidised fuel.
Reacting to the reversal of customs duty on LNG, company sources said it’s a very positive move given the industry’s growing dependence on imported gas in wake of the declining natural gas production in the country, primarily due to steep fall in gas production at Reliance Industries D6 block in Krishna-Godavri basin, the country’s largest gas reservoir.
According to industry estimates, the two existing terminals at Dahej and Hazira and the Dabhol terminal, which could be commissioned by March-end, will receive around 250 LNG cargoes and the customs duty at the existing rate will be around Rs 2,500-3,000 crore.
At present, the two operating LNG terminals in the country – Petronet LNG’s Dahej terminal and Shell’s Hazira terminal – are importing about 13 million tonne (mt) annually. While Petronet’s terminal is running at excess capacity of around 11 mt (terminal capacity is 10 mt), Shell is running at full capacity (of 3.6 mt) and is also in the process of increasing it to 5 mt.
Also new terminals are coming up – Petronet’s Kochi terminal (5 mt) and Dabhol LNG terminal (5 mt) – which will lead to further rise in imports.
On the viability gap funding, company executives said they need more clarity on exactly who will be helping out with additional funds, whether it’s the government or state-owned banks and what exactly will the entire methodology entail. They said it’s a welcome move given that most lenders and investors are wary of pumping cash in the Indian oil and gas sector which is affecting key projects.