Moneycontrol | OMCs took big hits, discussions on for further compensation to parry FY23 losses: Minister Hardeep Puri

Jan 12,2023

Oil marketing companies (OMCs) "took big hits" during fiscal year 2022-23, and discussions are on for further compensation to parry their losses, Petroleum and Natural Gas Minister Hardeep Singh Puri said on January 12.

The OMCs suffered losses for not passing on the complete burden of the surge in gas prices, on account of geopolitical factors, during the first half of this fiscal. The government had, in October 2022, released Rs 22,000 crore to compensate them.

Sources told CNBC TV-18 that OMCs are now expecting a cash compensation of Rs 50,000 crore to parry the losses incurred due to the freeze in retail prices of petrol and diesel in 2022 despite a steep rise in crude rates.

Puri, while speaking at an event in New Delhi today, said, "OMCs, as good corporate citizens, took a big hit on the gas front. They came to us and said they have been good corporate citizens and need to be compensated as they also raised money from market, banks. They had to answer to their shareholder. As a one time acceptation of the Rs 28,000 crore they spent, we gave them Rs 22,000 crore."

"Now, they are telling us they have taken a hit on petrol and diesel as well. It is under discussion now. As a line minister, I am supporting them," Puri added.

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The state-run OMCs — Indian Oil Corporation Limited (IOCL), Hindustan Petroleum Corporation Limited (HPCL), and Bharat Petroleum Corporation Limited (BPCL) — had suffered cumulative losses of Rs 3,805.73 crore in the first half of FY23.

The public sector oil companies also expect an immediate Rs 2-3 hike on diesel prices as they are still recording under-recovery in diesel, CNBC TV-18 had reported.

OMCs typically revise retail petrol and diesel prices daily, based on the rolling average of international benchmark prices over the past 15 days. But, earlier in 2022, they had to keep prices unchanged despite a rally in crude oil prices to help keep inflation in check, which eventually dented their bottomline.

India to produce 5 million tonnes of green hydrogen by 2030

Puri was speaking at the 11th edition of ‘Bio Energy Summit 2023’ by Confederation of India’s Industry.

Discussing the country’s Green hydrogen policy, the minister said, “a production target of 5 million tonnes to be achieved by 2030 has been set.”

He further said that India’s Green Hydrogen policy announced in February this year is a “revolutionary shift”, set to make India a global hub for green hydrogen and green ammonia production. “India aims to produce 4 MT Green Hydrogen annually & accrue Rs 1 lakh crore of cumulative fossil fuel import savings by 2030,” he added.

Elaborating on India’s energy transition to meet the goals set, he said, “I think India is the only country in world which has brought down cost of solar power from 25 cents to 3 cents a unit. Just about every electrolyser manufacturer in the world has tied up with Indian companies. These are the only two things required for the production of green hydrogen.”

Insisting that it’s the refineries that have taken up the job of producing Green hydrogen, he said, “I believe success of green hydrogen will come from petroleum and natural gas sector.”

The Minister said that India is undertaking an ambitious journey of energy transition to achieve net carbon zero by 2070 and this transition has to be stable and ensure that it remains consistent. Our OMCs have come out with their respective net zero targets - IOCL by 2046, BPCL and HPCL by 2040 which also means that OMCs are gearing up for the change in energy source and use, going forward, he added.

Puri also spoke about the importance of Production Linked Incentive Scheme (PLI) saying that while earlier subsidies were generally available, the govt realised that they get better results when they have targeted subsidies. “PLI is a very good scheme this way.”

Ethanol blending to reach 20% ‘very soon’

Responding to Moneycontrol on the future of ethanol blending, Puri said that the country will get to 20% very soon. “We only have to make sure we go about that ecosystem rationally. Rationally meaning, there is no point producing ethanol in Punjab & spend as much diesel in transporting it to Tamil Nadu. We should produce as much in a place as can be consumed & that is what we are focusing upon.”

India had already increased the ethanol blending in petrol from 1.53% in 2013-14 to 10.17% in July 2022.