It is the coffers of upstream companies like Oil and Natural Gas Corporation (ONGC) that the government has been using to keep retail prices of petrol and diesel much lower than market prices. The Rs 65,000-crore navratna company is, however, not in a position to take on any more subsidy burden since crude oil prices are sharply down and input costs are yet to decline, Chairman and Managing Director RS Sharma tells Vandana Gombar and Rakteem Katakey in an interview. He also talks about the hurdles that the cash-rich company is facing in acquisitions. Excerpts:
When crude oil prices moved from $80 to $120, the company’s average realisation per barrel came down from $56 to $46. Are you an upstream company which wishes for lower oil prices?
As an oil producer, why should we wish for lower prices? We have to look for increasing revenues especially when the costs have multiplied exponentially in the last 2-3 years. Even today, we find that cost of rigs and services have not come down.
What according to you is a fair subsidy sharing formula?
I have been saying this time and again that this ad hocism in decision making has to be done away. It is a crude and most unprofessional way of deciding the subsidy sharing. The government has to have the courage to come out with a matrix which shows at different level of crude prices, what should be product prices…and how much the government would like to support the consumers. The Chaturvedi Committee did come out with some mechanism but I don’t know where that report is gathering dust.
So what subsidy burden are you willing to bear?
Nil. I don’t want any subsidy sharing. There is no case at these prices of $50 per barrel for any subsidy burden on the upstream companies. The Chaturvedi Committee recommended that at prices less than $75 per barrel there should not be any subsidy sharing by the upstream companies.
It has been over two years since you first brought up this issue of ad hocism. Could you have fought any harder to end it?
Well, if I try to fight harder I will be breaking my head, which I don’t want to do. You see the government also has their compulsion. This is an issue which the petroleum ministry cannot decide in isolation so I can’t find fault only with the petroleum ministry. It is the whole government machinery.
You forecast oil to be back at triple digit levels. Is that possible in 2009?
Going to $100 within a year seems difficult. It all depends on the recessionary trends. Today, the bottom is still not seen.
Is the Imperial acquisition ($2.1 billion worth) on track or is there some rethinking (since the deal was struck when oil was at $120 per barrel)?
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