Union Budget 2024 scraps Rs 15,000 crore mega net zero fund for OMCs

Originally announced as a Rs 30,000 crore fund in Budget 2023, the fund was never disbursed

The government has quietly done away with a mega fund aimed at energy transition and net zero objectives for state-owned oil marketing companies (OMC), first announced in last year's budget, but never disbursed.

Budget 2023 (for FY 2023-24) had earmarked a mega capital outlay of Rs 30,000 crore for priority capital investments in projects for energy transition, energy security, and achieving net zero emissions by 2070. The record-high budgetary grant for green transition was to be a key driver in reducing the economy's carbon emissions and leaping towards green fuels and energy sources.

However, it was never disbursed, and the interim budget presented in February this year halved the fund to Rs 15,000 crore. The equity infusion was also deferred to the next financial year, FY25 (2024-25).

Budget 2024 (for FY 2024-25) has removed the allocation. This has reduced the Petroleum Ministry's budgetary allocation by 46.38 per cent to Rs 15,930 crore, down from the Rs 29,713 crore allocation in February's interim budget.

Record high profits

Earlier this month, Business Standard had reported that while the fund was a key task for the Petroleum and Natural Gas Ministry at inter-ministerial consultations, finance ministry officials had remained unconvinced of the merits of retaining it at a time when the OMCs are ringing in record net profits in FY24.

The finance ministry had pointed to unprecedented levels of profits booked by OMCs to ask why they can't bankroll their energy transition goals on their own. The combined profit of the public sector OMCs—IOCL, BPCL, and HPCL—rose to Rs 86,000 crore in FY24. This was over 25 times higher than the preceding year. In FY23, a combined profit of Rs 20,224 crore by IOCL and BPCL was countered by a loss of Rs 8,974.03 crore by HPCL.

The fund was set to focus on investments in new-age fuels—green hydrogen, ethanol, and other biofuels, with the capex pipeline expected to firm up from FY24 (2023-24) onwards.