Government Cuts Off ₹30,000 Crore Capital Support for Profitable Oil PSUs

The Indian government has abruptly halted its planned ₹30,000 crore equity infusion into state-owned oil giants Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL), and Hindustan Petroleum Corporation (HPCL). This reversal comes on the heels of a record-breaking fiscal year for these companies, which collectively amassed a staggering ₹81,000 crore in profits.

Initially proposed in the 2023-24 budget to bolster the companies’ transition to cleaner energy, the equity infusion was subsequently halved to ₹15,000 crore in the interim budget. However, the government has now completely withdrawn this financial support in the full budget for 2024-25.

The decision underscores the dramatic turnaround in the fortunes of these oil retailers. Having weathered the storm of soaring crude oil prices and government-imposed fuel price controls in the previous fiscal year, they have emerged stronger than ever. This newfound financial stability has prompted the government to reassess its role as a financial lifeline for these state-owned enterprises.

The withdrawal of the equity infusion aligns with the government’s broader strategy of promoting self-reliance and financial prudence among public sector undertakings. With ample resources at their disposal, the oil PSUs are now expected to fund their growth and expansion plans independently.

Concurrently, the government has also abandoned its proposal to fill strategic petroleum reserves, a measure aimed at ensuring energy security. However, it has maintained a budget allocation of ₹11,925 crore for LPG subsidies, albeit slightly lower than the previous year.

This strategic shift signifies a departure from the government’s earlier approach of providing substantial financial support to state-owned enterprises. As these companies demonstrate their ability to navigate challenges and generate substantial profits, the government is increasingly adopting a hands-off approach, encouraging them to become more self-sufficient and financially resilient.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.