Centre to infuse equity in 3 OMCs after they announce capex plans: Report

Centre is looking to infuse more equity and a possible stake increase in three oil marketing companies (OMCs), Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL), after they submit their capital investment plans, a report by The Economic Times (ET) said.

A government official was quoted in the report as saying that the Centre has set aside Rs 30,000 crore for capital support to these OMCs. The instruments through which equity will be infused have not been finalised.

OMCs, however, are concerned that equity infusion might impact their share price, market valuation and market perception.

The three companies meet over 90 per cent of India's petroleum demand. However, they are facing financial strain. In the first half of the last financial year, these companies booked a cumulative loss of Rs 27,276 crore owing to selling liquified petroleum gas (LPG) and other cooking gases below the cost price.

In India, LPG prices are regulated by the Centre.

"We are not in a very good financial situation right now. We were expecting some financial help from the government. But so far nothing has come," another official from one of the three OMCs was quoted as saying by ET.

In October last year, the Centre had approved a one-time grant of Rs 22,000 crore to OMCs to make up for the losses. In January this year, these companies demanded another Rs 50,000 crore cash compensation from the Centre to meet their requirements for 2023-24.

Currently, the Centre holds a 51.5 per cent stake in IOC. The rest is held by the public. In BPCL, it holds 52.98 per cent stake with 46.71 per cent held by the public. In HPCL, the state-run Oil and Natural Gas Corporation (ONGC) holds a 54.9 per cent stake and the rest is owned by the public.

Centre was also planning to sell its entire 52.98 per cent stake in BPCL but the plan was scrapped owing to the Covid-19 pandemic and the Russia-Ukraine war.