Interim Budget 2024-25: OilMin bats for retaining energy transition fund

Rs 30,000 cr was announced in last year's Budget but never disbursed

The Petroleum and Natural Gas Ministry has told the Finance Ministry that a Rs 30,000 crore fund for energy transition and net-zero objectives announced for oil marketing companies (OMC) in last year's Budget, but never disbursed, needs to stay in the upcoming Budget.
 

The last Budget had earmarked a mega capital outlay, which was set to focus on new-age fuels — green hydrogen, ethanol, and other biofuels.
 

The record high budgetary grant towards green transition was to be a key driver in reducing the carbon emission of the economy and leap towards green fuels and green energy sources.
 

 

The Centre had entrusted the oil ministry, which has the highest fossil fuel footprint, to steer the energy transition of the country.
 

While the funds have not yet been disbursed so far, the Finance Ministry has now argued to slash it further.

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Finance Ministry officials have pointed to record profits made by OMCs in the previous two quarters to call for a cut in the Rs 30,000 crore fund.
 

Aggregate Q2 (July-September) FY24 net profit of major OMCs rose to Rs 28,836.5 crore compared with an aggregate loss of Rs 4,509.9 crore in Q2 FY23. The companies were helped by expanding margins due to a rise in sales volume despite falling revenue. 
 

But the Petroleum Ministry has argued against this. “Global oil prices are expected to be volatile next year given the increasing hostilities in the Red Sea region. During inter-ministerial consultations, we wanted the grant to remain in the upcoming Budget,” officials said.
 

Meanwhile, retail fuel prices in India have been unchanged for a record 20 months now. In the national capital for example, petrol and diesel prices last saw a revision on April 6, 2022, when prices of both the fuels were raised by 80 paise a litre.
 

Since then, the OMCs have not raised prices throughout the war in Ukraine and the volatility in crude prices that have followed.


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Transition ongoing
 

But all OMCs have nonetheless already kick-started measures towards energy transition. 
 

They are currently in the process of drafting a comprehensive plan on ramping up green hydrogen production. Under the Centre's Rs 19,744 crore Green Hydrogen Mission, mandatory procurement of green hydrogen has been stipulated for various sectors, including refineries.

The OMCs have also begun to produce ethanol from bio residue and agri waste.

The plan is in sync with the Centre’s long-term target of higher levels of ethanol blending with petroleum. E20 or petroleum blended with 20 per cent ethanol will be retailed from April 1.

The Centre's ethanol blending programme has been a major success for petrol, with E20 petrol (petrol blended with 20 per cent ethanol) now selling at more than 9,300 pumps across the country. It is on track to cover the entire country by 2025.

Both have also tapped more unconventional measures. BPCL and HPCL are in the process of running vehicles on diesel mixed with ethanol.

Widely used in Europe, biodiesel refers to biodegradable fuel traditionally manufactured from vegetable oils, animal fats, or recycled restaurant grease.

Green aid

• The record budgetary grant to aid green transition was to be a key driver in reducing carbon emissions
• The focus was on shifting to new-age fuels such as green hydrogen, ethanol, and other biofuels
• While the funds have not yet been disbursed, the finance ministry is planning to cut them
• However, all oil marketing companies have started transitioning towards green energy