India’s major oil players, including Oil and Natural Gas Corp (ONGC), Indian Oil Corp (IOC), and other state-owned oil public sector undertakings (PSUs), are set to inject approximately Rs 1.2 trillion in the upcoming fiscal year starting April 1. This ambitious investment aims to bolster various sectors such as oil and gas exploration, refineries, petrochemicals, and pipeline infrastructure, catering to the demands of the nation as it emerges as the world’s fastest-growing energy consumer.
According to Budget 2024-25 documents, the proposed investment for the fiscal year 2024-25 is 5 per cent higher than the Rs 1.12 trillion spent by state-owned oil firms in the current fiscal year ending March 31.
ONGC is slated to lead with a planned capital expenditure of Rs 30,800 crore in the next financial year, focusing on the exploration and production of new oil and gas reserves. Similarly, ONGC Videsh Ltd (OVL), ONGC’s overseas arm, plans to invest 68 per cent more at Rs 5,580 crore in 2024-25 for oil and gas operations abroad.
Indian Oil Corp (IOC), the country’s top oil refiner, will be the highest spender, allocating Rs 30,910 crore. The majority of this investment will go toward the expansion and upgrading of its seven refineries dedicated to fuel production. This budget also includes Rs 3,299 crore for its petrochemical business and an additional Rs 236.48 crore for small-scale oil and gas exploration.
Bharat Petroleum Corp Ltd (BPCL) has proposed a 30 per cent increase in capital spending, allocating Rs 13,000 crore, with a major focus on refining activities.
GAIL India Ltd, the gas utility company, anticipates a decline in planned investment to over Rs 8,000 crore in 2024-25, primarily as its ongoing pipeline grid expansion projects near completion.
Hindustan Petroleum Corp Ltd (HPCL), an ONGC subsidiary, plans to invest Rs 12,500 crore in the fiscal year 2024-25, slightly higher than the Rs 12,000 crore invested in the previous year.
Oil India Ltd, the nation’s second-largest oil producer, will channel Rs 6,880 crore into investments in the coming year, compared to Rs 5,648 crore in the current fiscal year.
In a surprising move, 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. This decision was a departure from her announcement in the annual budget for 2023-24, where she had proposed an equity infusion of Rs 30,000 crore to support the energy transition plans of these companies.
Industry sources suggest that the profitability of these companies in the current fiscal year may have influenced this decision, as they are making substantial profits despite the freeze in retail selling prices for petrol, diesel, and cooking gas. The decision to limit equity support to these three fuel retailers, who suffered significant losses in 2022, may be related to the overall improvement in their financial performance.
The government’s focus on limiting fiscal deficits and prioritizing spending might be the driving force behind trimming equity infusion and not allocating funds for strategic reserves in the current fiscal year. The budget documents did not specify any funds for these purposes in either the current fiscal year or the next. While ONGC and GAIL India Ltd have committed significant investments to achieve net-zero carbon emissions, the equity support has been primarily directed to the three fuel retailers—IOC, BPCL, and HPCL. The decision reflects the government’s strategy in balancing fiscal responsibilities while fostering growth in the energy sector.
